Your jewellery could be your cash cow. If there is any emergency situation rises and you need money urgently, your jewellery can come handy. Gold loan has a history attached to it. As we have seen in many Bollywood movies where Lala types use to mortgage jewellery of hapless villagers and in return use to lend money so that they could meet the emergency situation.
Till few years ago, it was catered to by unorganized players mainly jewellers who use to mortgage jewellery at higher rate of interest and lower loan to value ratio. There were no such investment avenues like we have today but need was there. So that people could get good value proposition for mortgaging their jewellery. Historically we see that Gold has been perennial favourite of Indians be it any occasion gold was bought and gifted. Owing to the easy liquidity, easier availability, it was considered to be the safest investment haven. If we see the returns in Gold, they have always been able to beat inflation, thus providing hedge against price rise and fall.
This was the time when NBFCs ( Non-Banking Financial Companies) stepped in, and grabbed the space within not time, looking at their performance, banks too became active in the area, thus giving ample choice to customers. Gold loans are provided on the basis of the value of the ornaments. The lenders charge the interest on gold loans on the basis of the ratio of the loan to the value of the gold ornaments which is popularly known as LTV Ratio. Higher the LTV, higher the rate of interest charged by the lender as he is left with lower margin. Now it was time for Sukhi Lalas to move into oblivion.
Lenders earlier used to finance up to 90% of the value of gold jewelry / ornaments. However going by the current RBI instructions, now the gold loan companies have been instructed not to lend beyond 60% of the value of the ornament. Depending on the LTV, the rate of interest ranges between 12% – 28% p.a. Gold loans typically are for the duration of one year and the duration can be further extended at the prevalent rate of that time. During the period you are supposed to pay the interest regularly.
If you are a gold loan aspirant, visit the branch office of the lender along with your gold jewelry. The lender will evaluate your jewellery and will provide the loan based on their valuation rather than the cost mentioned in your purchase bill.
Muthoot Finance and Manapurram Finance are two very active players in loan against gold jewellery. Banks like HDFC Bank, State Bank of Travancore, Central Bank of India and Indian Overseas Bank also provide these loans. Remember lower the amounts of loan you take per gram, lower will be your interest rate. Go for gold loan but not before comparing the features like LTV ratios, interest charged, financial stability of the lender etc. Last but not the least, it is cheaper alternative to Gold Loan.
Particularly when Gold is rallying, your Gold Jewellery can fetch you more money.
What else do you look for? Have your way with GOLD!