Are you wondering whether you need to have a good CIBIL score to avail a gold loan? The answer is big NO. There is no good or minimum CIBIL score required by lenders for you to avail gold loan. Gold loan is a security-backed loan in which gold’s purity and value is more vital for the loan approval, compared to your credit score.
However, gold loans remain the best available lending options for applicants with low or no credit score who possess gold jewellery or ornaments to be submitted as collateral/security with the lender bank or NBFC.
Know more regarding the basics of gold loans and the significance of CIBIL score while applying for gold loan, along with its features, eligibility criteria and much more.
What is Gold Loan?
Gold loan is a collateral-based loan where gold is deposited by borrowers and they get loan against the deposit. Gold loan is mainly used by borrowers to meet their urgent cash requirements by submitting their personal gold jewellery in the form of collateral/security with the lender. The loan amount offered against gold is usually up to 75% of its value, depending upon its purity and value. Gold loan comes with no end use restriction unlike some other types of loans, such as home loan, business loan, car loan, loan against property, etc. Gold loan is considered the most secured loan option, as prices of gold have always increased since years. It is also an exceptional credit product, as lenders do not check your credit score for loan approval.
CIBIL Score and its Significance in Gold Loan approval
CIBIL score is a 3-digit numeric that ranges from 300-900 which depicts your creditworthiness and repayment capacity. However, if you plan to apply for a gold loan then the potential lenders may not check or consider your CIBIL score. Gold loan is a secured loan that is backed by a collateral/security in the form of gold ornaments or jewellery. Even if you have a bad credit score or you are new to credit, lenders may not check your CIBIL score before loan sanctioning.
Features of Gold Loan
Below-stated are the basic features offered by various financial institutions to meet short-term personal needs.
- No CIBIL score and income proof required
- Competitive interest rates based on your gold’s value, Loan-to-Value (LTV) ratio and repayment tenure
- No end-use restriction with minimum processing fees
- Multiple repayment options
- No foreclosure or pre-payment charges
- Higher Loan-to-Value (LTV) ratio – Up to 75%
- Minimum documentation
- Hassle-free loan application process
- Loan disbursals in as less as 45 minutes
Eligibility Criteria for Gold Loan
- CIBIL score: Not required
- Age: Minimum age of 21 years at the time of loan application and maximum up to 70 years at the time of loan maturity
- Gold Purity: 18-22 Karat
- Indian Citizen with no previous credit default with any financial institution
- No past criminal background of the applicant
Note: Most of the lending institutions do not accept gold bars, coins, utensils or any other similar items as collateral.
Documents Required
- Duly filled application form with passport-sized photographs
- Applicant’s KYC documents
- Voter’s ID card, driving license, Aadhaar card, Passport or NREGA job card (Any one required)
Uses of Gold Loan
Gold loan is a unique financial product that helps you to meet your short-term personal needs. It is mainly used for various below-mentioned purposes:
- To meet wedding expenditure
- To cover medical expenses
- For debt consolidation purposes
- To meet educational costs
- To fund business venture(s)
- For home renovation purposes
- For vacations and much more
Things to Consider:
Loan against gold is the most convenient way to avail instant funds to meet your personal or business requirements. By pledging your gold items, it assures the lender that you shall be able to repay the loan amount in time. As gold loans are offered against gold ornaments or jewellery items, financial institutions do not rely on your CIBIL score before loan sanctioning. However, this does not mean that you start disregarding or neglecting your CIBIL score.
Your CIBIL report is thoroughly checked by financial institutions before approving any loan or credit card application. Make a regular practice of checking your updated CIBIL report for errors and rectify it at the earliest. Maintain a good CIBIL score of 750 or above to avail hassle-free loan with added benefits. A healthy CIBIL score shall always make you credit fit and help you avail funds at ease in the near future.