How Does a Gold Loan Works?

Gold has evolved from being a precious metal for beautiful jewellery to becoming an extremely popular investment instrument in India. Moreover, when you need cash urgently for business needs,unplanned expenses or medical emergency you can take out a Gold Loan and fulfil your needs o your own. So, how does a Gold Loan work? Let’s find out

Gold Loan – How it Works
Secured loans

For a Gold Loan, the bank takes your gold as collateral for the period of the loan. Banks charge an interest rate, and once you repay the entire loan, the bank returns your jewellery. 

Type of gold accepted
Another essential thing you need to know about how Gold Loan works is the type of gold accepted. Most banks accept only gold jewellery. Also, the purity of gold provided as collateral should be between 18K and 22K. 

Maximum Loan to Value ratio provided by banks
Typically, most banks provide Gold Loans for a maximum loan to value ratio of 75% of the current market price of the gold. So, if you end up mortgaging gold worth ₹ 100,000; the maximum loan amount you can get is ₹ 75,000. 

Gold evaluation and loan sanction process 
While speaking about how does Gold Loan work, we must mention the evaluation and sanctioning process. The bank evaluates the gold provided as collateral, after which it determines the maximum loan amount you can get, and the interest rate levied on it. As the borrower, you can select the loan repayment tenure, which should be between 6 and 24 months. With HDFC Bank, you can get a Gold Loan in less than an hour. 
Now that you know how Gold Loan works, you can apply for one from HDFC Bank. Click here to send your Gold Loan application.