Gold loan for agriculture and business: Get 4 percent interest rate

gold loan

Gold loan is one of the most secured loan which banks offer to public as they carries zero risk weightage to banks. So if you want to apply for loan against gold you have almost 100 % chances of getting it approved. Major advantages of gold loan are that they require minimum documentation with faster approval and disbursal process.

Gold loan for agriculture and business: Get 4 percent interest rate

Purpose for which gold loan is given

Gold loan is given to provide financial assistance when there is urgent need of cash by someone. Applicant has to give undertaking regarding the use of finance given to him against gold.

Generally, assistance given is for Agriculture purpose and for non- agriculture purpose. Let’s get complete details.

Agriculture purpose

Gold loan under agriculture purpose is given to farmers for crop production and for allied activities.

Allied activities include purchase of tractor for cultivation, tube well boring for irrigation purpose ETC

End use of finance provided under gold loan for agriculture is verified by bank official so you have to satisfy him for genuine use of funds before sanction of your loan amount.

Non-Agriculture purpose

Gold loan is also given for non-agriculture purpose like priority and non-priority sector.

Priority Sector 

Priority sector is sector which government and RBI consider important for the development of the country and hence sufficient finance should also be made available to theses sector from banks.

1) Micro, Small and Medium Enterprises

2) Export Credit

3) Education

 4) Housing

5) Social Infrastructure

6) Renewable Energy

7) Other

End use of finance provided against gold for these sectors is verified by the banks. You can also check Business loan without any guarantee

Non-Priority Sector

sector which government and RBI think is important for the development of Oneself not for the development of the country as a whole

Personal loan under non-priority sector for meeting personal requirements, such as, medical treatment, purchase of consumer durables etc. on the basis of declaration by the borrower.

End use verification is not done by the banks

Eligibility

To avail gold loan there is no such complex eligibility criteria as required for other type of loans. You may be farmer, trader, salaried, non-salaried or any self-employed professional.

You only have to comply with just one or two basic thing before getting your loan application approved.

Let’s get details of all the eligibility parameters

1.Age limit

Any Indian Citizen with the minimum age of 18 years and maximum age up to 70 years of age. Age limit depends from bank to bank some banks like AXIS bank has put upper age limit at 75 years and almost all the public sector banks have upper age limit up to 70 years of age

2.Form of gold eligible for gold loan.

loan against gold
  1. Loans would be available against pledge of Gold Ornaments and Jewelry.
  2. Gold coins up to maximum 50 grams can also be pledged for loan.

3.Credit score

Credit score is checked to make assessment of credit worthiness of the borrower and is generally checked where loans given are unsecured in nature.

But as gold loan is fully secured and are given against 100% security so, there is no need for good credit score to avail gold loan.

Quantum of finance

This depends from bank to bank. Some banks gives loan against gold minimum up to five thousand and maximum up to one crore. lets have a look at lower and upper limit of some banks.

BANKLower limitUpper limit
ICICI BANK1000010000000 
STATE BANK OF INDIA200005000000
AXIS BANK250002500000 
CANARA BANK50002000000 
UCO BANK no lower limit1000000 
PUNJAB NATIONAL BANK250001000000
UNION BANK 250001000000 

Repayment options

You get four types of repayment option for gold loan.

1.Bullet repayment option

In this type of repayment method, you have to repay complete loan amount (principal+ interest) at the end of loan period. In this interest is calculated on monthly basis which is served at the end of loan period along with principal. Loan tenure for this type of repayment method is usually for only 1 year. Overall cost on loan is much more than other types of repayment methods (interest + principal keeps on increasing until reaches maturity of gold loan tenure)

2.Interest payment upfront and repayment at the end of loan period

In this type you have to pay interest calculated on monthly basis at the beginning of loan period and the principal is to be paid on loan maturity that is at the end of loan period. Usually given for maximum three years of tenure. Overall cost on your loan is least in this type of repayment method. (interest is calculated annually on the principle)

3.Monthly interest payment and repayment of principle at the end of loan period.

In this type you have to pay interest calculated on monthly basis in that particular month and the principal is to be paid on loan maturity that is at the end of loan period. Usually given for maximum three years of tenure.

4.Equated monthly instalments

In this type of repayment method, you have to pay monthly instalments of principle and interest every month up to maturity of loan tenure.

Rate of interest

On loan against gold for agriculture– Loan against gold for Crop production up to three lakh rupees is applicable for interest rate at 9%  (including 2% interest subvention & Prompt Repayment Incentive of 3%). Means  you have to pay only 4% interest on your gold loan if you pay all your due promptly.

ROI for non-agriculture purpose- Interest rate depends from bank to bank

List of banks with current rate of interest on gold loan

BankROI
STATE BANK OF INDIA (SBI) 7.5%
CANARA BANK7.65%
UCO BANK7.80%
PUNJAB NATIONAL BANK 8.75%
UNION BANK9.35
AXIS BANK13%
ICICI BANK 14%

Documents required for gold loan

Major advantages of loan against gold are that they require minimum documentation, you have to deposit one officially valid ID proof along with gold loan application.

Final words

Gold loans are the most secured type of loan and you will get approval within a day or two for your loan application. But this doesn’t indicate that you should take loan more than your repaying capacity do remember gold loans are short term loan and you have to repay principal along with interest at maturity.  If you do not pay back your dues bank will recover that amount from sale proceedings and you will lose you gold ornaments. There is no legal remedies for this so beware before taking gold loan more than your repayment capacity.

Consider for loan against gold only when you are in urgent need of funds otherwise there are various diversified loan products offered for every individual and corporate requirement.

5 best banks for gold loans

Canara bank– You will get loan minimum of rupees 5000 with zero prepayment charges and very low processing charges.

SBI bank– Gold loan with better repayment options and up to maximum 50 lakhs rupees with zero prepayment charges.

UCO bank– Gold loan for agriculture purpose up to 3 lakh rupee with zero prepayment charges.

AXIS bank– Gold loan for borrower up to maximum 75 years of age (but have high processing charges and some pre closer charges also)

ICICI bank– Gold loan up to 1 crore rupees with same day disbursal and offer no pre closer charge on gold loan after 3 months of regular loan conduct(penalty on closer before three month of loan period)

you can also check for home loan eligibility

FREQUENTLY ASKED QESTIONS

How many types of gold loans are there

There are four type of gold loan classified according to type of repayment option opted by you.
1.Bullet repayment option
2.Interest payment upfront and repayment at the end of loan period
3.Monthly interest payment and repayment of principle at the end of loan period.
4.Equated monthly instalments

What are the benefits of gold loan

One of the major benefit of loan against gold are that they require minimum documentation, less approval time and same day disbursal of loan amount.
No minimum CIBIL score requirement.

What is the disadvantage of gold loan

Loans against gold are given for short duration of time usually for 12 months and in some cases for maximum 36 months. So, you have to repay all amount within very short period of time and in case you are not able to repay you can lose you gold to bank.

Documents required for gold loan

For loan against gold you require minimum documentation, you only need to deposit one valid identity proof along with one address proof.

Can I get gold loan for agriculture

Yes, you can get loan against gold for agriculture and non-agriculture purpose. For agriculture purpose you need to produce documented proof for possession of agriculture land and on the basis of land holding your loan entitlement is decided.

What happens if gold loan is not paid

If, loan against gold is not repaid you may loss you gold as bank will auction your gold to recover its outstanding dues.
Your CIBIL score may also get affected by this and it reduces your credit worthiness and your future loan applications may get rejected.

 

loan against gold

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