Gold Loan:

Gold Loan is defined as a form of debt financing whereby a potential gold producer borrows gold from a lending institution, sells the gold on the open market, uses the cash for mine development, then pays back the gold from actual mine production. Gold loans had less appeal in the 1990s as mining companies were offered other increasingly sophisticated financial instruments, such as forwards and options, by the bullion banks.

Have you been looking around for a personal loan for some immediate requirement? If yes, then I
would suggest you to go for gold loan instead of personal loan. Personal loan is a loan given by banks and other private lenders to meet any kind of personal need like marriage, buying an electronic item or anything else. Gold loan also has the same intention of meeting any of your expenses. The difference between the two is that in case of personal loan, you do not have to give any kind of collateral whereas gold loan is backed up by your gold.

What is the difference in cost?

Since personal loans are given to you without any collateral, banks need to do a scruitny of your
income proof documents and hence charge you a processing fees. This processing fees generally varies from 0.5 per cent to 1 per cent of loan amount. The benefit with gold loans is that you don't need to submit any income proof as such. Most private gold loan providers do not ask you for any income proof. Although banks operating in this field may need some documentary proof. The real benefit is the processing fees though. Major gold loan providers like Muthoot finance do not charge any processing fees. You just need to deposit your gold and you get the loan. The whole process does not even take more than 15 minutes. Deposit gold, sign some documents and walk away with cash. Please do keep in mind that banks may charge processing fees on gold loans but if you can negotiate, it can be waived off easily.

any other benefit? 1. Lower interest rates

If you closesly look at the gold loan interest rates in market, you would find them hovering around 12

to 15 per cent per annum whereas the personal loan rates range from 18 per cent to 24 per cent. A stagerring difference of six per cent between the minimum interest rates places gold loan in my preffered list too.

2. Pre-payment charges

Generally you need to repay your loan using a fixed EMI spanning over a fixed period of time. And
if you pre-pay any amount, banks charge you a pre-payment fees of about two per cent of current outstanding principal amount. This is not the case in gold loan. You can repay any amount and close your loan account anytime. I have personally done this when I took gold loan from.

. No EMI, service only interest and enjoy the loan facility

This is one of the features available only in gold loans. Since the lender has the gold deposit whose
value is more than your loan amount, they are able to offer you the no EMI option. That is, you don't need to pay a fixed amount of EMI which is a combination of interest amount plus principal repayment. Only keep paying the interest amount and the lender will be more than happy to keep the loan account active for years. Well, this is of course not a good thing to do as you will never be able to get your gold back unless you give back the principal amount of your original loan. But yes, it does offer you a flexibility in terms of minimum commitment in hard times when you are out of job of need to pay some emergency medical bills.

How much amount do you get in gold loan?

The loan amount is dependent on your salary in case of personal loan and on the value of gold in
case of gold loan. So, these are two different perspectives. Let's say that you are earning Rs 50,000 per month, then you would be eligible for about Rs 10 lakh of personal loan for a period of about 5 to 7 years. Contrast this with the gold loan option where the amount of loan that you can get depends on the value of gold you possess. Traditionaly, India has been the biggest consumer of gold and you can find it in your home easily. You can normally expect the loan amount of up to 70 per cent of current market value of your gold. And this amount can go up to 90 per cent if you are ready to pay higher rate of interest. This is based on individual company schemes.

Margin percentage is a concept which is quite prevalent in home loan cases and the loan borrower is
normally not aware of it until he has availed the loan. Nobody in the bank sales team will explain you the concept as it may confuse their prospective client which is you. We, as loan borrowers never try to find out the intrinsic details while applying for loan as we are in hurry but find certain policies strange and betrayal by bank when we actually encounter them. One of them is margin percentage and I myself have learned this term when I went to bank to get the disbursement of loan and was taught the lesson of this concept. Here is the explanation of what it is and how it affects you as a loan borrower: Let's understand the whole thing with an example. Storyline: Property cost: Rs 50 lakh Your contribution: Rs 20 lakh Home loan: Rs 30 lakh You apply for loan and get the approval done from bank. You payment plan to builder/developer is contruction linked plan, that is, you have to make payments on the basis of construction stage and this plan is shared with you by builder in advance.

What is margin percentage?

If you take a closer look at your home loan documents, you will find this margin money percentage
clearly written on it. In our example it is calculated as follows: Margin percentage = (Your contribution in total value of property) / (Total value of property) * 100 Margin percentage = 20,00,000 / 50,00,000 * 100 Margin percentage = 40 per cent

Short notes on Gold Deposit Scheme

Nupur Singh Notes The Government of India has proposed a new Gold Deposit Scheme in its Budget for 1999-2000. The purpose of the Scheme was to mobilize idle gold lying with people/institutions like temple in India and utilize the same for productive purposes through the banking system. As per the scheme announced in September/October 1999 selected commercial banks are permitted to accept gold deposits from individuals, trusts and companies in the form of gold coin, jeweler, ornaments, gold bars, etc. The banks after ascertaining their gold content through the process of assaying will issue interest bearing gold bonds or pass books to the depositors. The depositors at the maturity of the bond will get back same quantity of gold or its equivalent value in rupees. Interest amount will be paid separately and it is exempted from income tax. Gold value is exempted from Wealth Tax. One of the purposes of the scheme is to reduce the import of gold from abroad.

In 1998-99 India imported 540 tonnes of gold through official channels. Non-Resident Indians are also permitted to bring with them 10 kgs of gold subject to certain conditions when they come to India. The scheme is beneficial to holders of gold as it provides safety and security to their gold holdings besides a regular interest income thereon. The deposit will be for a period between 3 and 7 years. The Gold Deposit Bond is transferable by endorsement and delivery as in the case with Negotiable instruments. Nomination facility is also available as in the case with bank deposit accounts. Specific approvals from Reserve Bank are required for banks to operate the scheme. The rate of interest, repayment period of deposit and other operational details will be decided by each designated bank. State Bank of India is the first designated bank for this purpose. Some more nationalized banks like Ganara Bank may also seek RBI permission to operate the scheme. The banks mobilizing gold deposit under the Scheme may utilize such gold for the following purposes: Indian Banking (Theory) (a) Gold loans to domestic jewellery industry (b) Gold loans to jewellery exporters (c) For sale in domestic market