Basics of Gold Loans

Banks and Non-banking finance companies (NBFCs) like
• Muthoot Finance, Muthoot Pappachan Group,
• Manappuram Finance
are few players who offer gold loans, that is, they sanction loans against your gold. Once you guarantee the gold, you can get a loan amount of 70-95% of its value.

The bank or NBFC will conduct a valuation of the gold by a set of professionals who follow traditional methods of checking gold. It could be as simple as rubbing the metal and using the caratmeter.

They do not use any such equipment on gold ornaments that can damage your jewellery in any way. They will return the jewellery back to you in the same condition, thus they have to adopt traditional techniques to check the gold quality. But it should be borne in mind that usually these skilled workers have an eye for gold. They can do the due thoroughness by looking at the jewellery.
When should one borrow?
You should always borrow for the right reasons.
One may borrow for various reasons such as repayment of a personal loan, any medical expense, unexpected expenses or any other unforeseen event. Often, people also borrow against gold as a stopgap loan or for giving the down payment for big purchases such as a car or a home.

One should always avoid using gold to borrow for margin money one will have to repay the two loans on a single salary. This could dent your personal finances. Also, one should raise the loan against gold to the extent of their repaying capacity only and not to the extent of the value of gold. In case one needs a higher amount and knows that he cannot repay the loan, it’s better to raise the fund by selling the gold instead of raising a loan against it.