In the last two years, the COVID-19 pandemic has changed the way we bank and apply for loans. Now, borrowers prefer applying for loan products on the lender’s website or through a mobile application. With an increase in demand for gold loans and to make things easier amid the pandemic, some banks, non-banking finance companies (NBFCs) and new-age fintech lenders have launched a gold loan at your doorstep service.
Financial institutions, including Federal Bank, ICICI Bank and IIFL Finance, gold loan NBFCs Indel Money and Manappuram, and fintech lending websites Rupeek, Ruptok, Dhandar gold, etc, offer gold loans at your doorstep. Let’s take a look at how this operates.
Here’s how to apply for a gold loan at your doorstep
You can book an appointment for a gold loan at the doorstep service through the lending bank, NBFC or fintech website and mobile application of the above mentioned firms. A loan manager will visit your home to carry out the due diligence and gold valuation.
You will need an Aadhaar or PAN as identity proof, electricity bill or telephone bill as address proof, and your photograph while applying for a gold loan.
The minimum and maximum loan amounts vary across financial institutions and fintech firms. If you apply for a gold loan at the doorstep from Federal Bank, the minimum amount you can avail is Rs 50,000 and the maximum sum is Rs 1 crore. Similarly, if you apply for a gold loan at the doorstep from Dhandar Gold, a fintech lender, you can avail a gold loan between Rs 25,000 and Rs 75 lakh. The gold loan tenure varies with the lender from three to six months. The doorstep gold loan services are available across major cities through financial institutions and fintech firms.
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The details of the loan amount, the weight of the gold, gold pledge date, list of gold jewels, interest payable and closure amount are available on your online account after borrowing.
What is the gold valuation process followed and the gold accepted as a pledge?
A loan manager weighs the gold at your home and verifies the purity with industry standard tests. The Reserve Bank of India has capped loan to value (LTV) at 75 per cent for gold loans. For instance, if the derived value of your pledged gold is Rs 5 lakh, then you will get a loan up to Rs 3.75 lakh.
Lenders accept gold jewellery of 18 karats and above. If you pledge gold ornaments, they will use only the gold portions to calculate the value; the lenders exclude metals, stones and gems from the calculation. They do not accept gold bars, gold coins and broken gold jewellery.
The gold loan gets processed in 30 minutes at your doorstep and the loan amount gets credited into your bank account instantly.
What’s the difference between borrowing from a bank/NBFCs and a fintech lender?
While applying for a gold loan from a bank or NBFC, you accept the interest rates charged and pledge the gold as per the loan amount.
However, with a fintech lender, you have multiple banks partnered with each offering gold loan. So, you can choose the gold loan from a partnered bank comparing the parameters such as interest rates and required net gold for pledging as per the loan amount. For instance, gold loan fintech lender Rupeek has partnered with Federal Bank, Karur Vysya Bank and South Indian Bank. Similarly, Ruptok has partnered with CSB Bank and Fincare Small Finance Bank. The interest rate and gold jewels valuation price vary with these partnered banks. If you directly go to a bank, they might offer you a doorstep gold loan service, but you may not have the option to choose a gold loan offer with the low interest rate offered by a fintech lender.
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What are the interest charges for a loan against gold?
The interest charge varies with the financial institutions. For instance, if you apply for a gold loan from fintech firm Rupeek, the applicable interest rates are 0.49 per cent per month (5.88% per annum) if you pay interest once in 30 days, 1.23 per cent per month (14.76% per annum) if you pay interest once in 60 days and 1.65 per cent per month (19.8% per annum) if you pay only at the end of tenure.
Similarly, IIFL Finance charges interest rates starting from 6.48 per cent and going up to 27 per cent annually. The interest rates vary according to the loan amount, tenure, and purity of gold pledged. You can repay the loan amount and interest either from the app or website of the lending institution. The payment modes accepted are debit card, net banking, UPI and money transfer facilities like RTGS, NEFT and IMPS.
How is the pledged gold handled and stored by the lender?
The banks and NBFCs store the pledged gold in their secure lockers under security and surveillance. Fintech firms store the gold with the partnered bank’s lockers. Fintech lenders such as Dhandar gold and Rupeek fully insure the gold with New India Assurance against any theft or accident during transit from your doorstep to the bank locker. The lender offers the insurance to the borrower and pays the premium.
After repayment and closure of the gold loan, the lender delivers the pledged gold to your doorstep. They insure the gold in transit.
Can I foreclose or prepay my gold loan?
Yes, financial institutions allow foreclosure. They charge a nominal closure fee of up to 2 per cent plus GST (of the loan amount) as foreclosure charges if the account is closed within three months. There are no foreclosure charges after three months.
What happens if I am unable to repay my gold loan?
If you fail to repay the loan in a timely manner, the lender will send a follow-up reminder and levy a late payment fee as penalty. Most banks charge a penalty of up to 2 per cent a year over and above the applicable rate of interest.
Despite reminders, if you cannot repay the loan, the bank may seize and auction the pledged gold to recover the outstanding balance. This will have a negative impact on your credit history and score.
