What Is The Maximum Amount Of Gold Loan?

Gold is a favorite and often the most trusted asset in our country. Each household irrespective of their financial status will have some amount of gold with them; some of it may have been passed down across generations with each generation adding to it. Whether old or new gold can come to your rescue in times of need as it can be mortgaged and you get a loan against it. There are many banks and financial institutions that offer loan against gold to applicants who fulfill the required eligibility criteria. Here we will discuss the gold loan and how much can you get?

A Brief About Gold Loans:

These loans are becoming increasingly popular owning to the quick turnaround time required to sanction these loans and also because gold loan interest rates are generally lower than personal loan rates. Both gold loan and personal loan are often used as a source of funds when one needs them for miscellaneous purposes. As per the guidelines laid down by RBI, NBFCs and all banks can grant a loan up to 75% of the market value of the value of gold.  When seeking a gold loan the applicant mist definitely compares interest rates (NBFCs generally charge higher), other charges that may apply, the loan tenure and the repayment option before they choose a lender.

How Much Gold Loan Can You Get?

Though gold loans are given against gold as collateral there are still eligibility criteria to be met regarding income and age, the lender will not ask for your credit report to assess your creditworthiness but these loans are reported in the CIR and thus do impact the credit rating in future.

Thus the amount of gold loan you can get will not depend only on the value of the gold that you mortgage but it will also depend on your income as the bank needs to make sure that you are able to service the loan and pay the installments on time.

Let’s assume there is an applicant who has jewelry worth Rs 50 lakhs which he wants to mortgage but he earns Rs. 15,000 a month.  As per the guidelines specified by RBI, the lender can sanction a loan up to 75% of the gold value which will be Rs. 37.50 lakhs but most lenders do not offer a loan up to 75% of the gold value. They generally offer a loan at an LTV of 60-65% which is Rs.  32.50 lakhs in this case. However, no prudent lender would be willing to offer a loan of this amount as they would know that the borrower will not be able to repay the monthly installments for the loan with his /her current income.

 

Interest on loans that are given at low LTV ratio is lower than compared to loans that are offered at a higher LTV ratio. The value of gold, coupled with the LTV ratio at which the bank offers the loan and the income level of the applicant influence the amount of loan one can take. Some lenders may also lay down the minimum income level at for the applicant to apply for a loan and also state that the applicant must prove his ability to service the monthly installments. In case of a gold loan taken for agricultural purposes, the lender may seek a proof that establishes land ownership.

Apart from the income, another limiting factor is maximum loan amount that the lender is willing to offer as gold loan. For example, the maximum gold loan offered by Kotak Mahindra Bank is Rs. 25 lakhs and for ICICI the maximum limit is Rs. 20 lakhs. So if we consider the above example even if the applicant is able to service the EMI for a loan of Rs. 32.50 lakhs he would get a loan of that amount as it is against the laid down guidelines of the bank.

So your loan will depend on the weight and purity of the gold, your income levels and bank’s policy regarding the LTV ratio and the maximum amount of loan that can be extended to an applicant.

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Understanding Educational Loan At Beginner’s Level

Education these days have become a really important aspect of an individual’s life. When it comes to family, the parents will always want their children to study more, at least more than what they have studied. When it comes to siblings, the elder once always wants the younger once to study more. Every family member wants that the kid/sibling should study best and achieve the target or the milestone which they could not achieve. And its not about putting the burden of their expectations on the younger one, but seeing them succeed in life!

This is now an emotional aspect of it. Let us see the practical aspect. Aspiring for higher studies either by your own dreams or for dreams of your family, Financial aspect is to be seen the first. Not every individual is born with a silver spoon! So managing the finances is a huge thing as the higher education, abroad studies do not come low!

When it is difficult to manage the whole expense of education or a major chunk, obviously an Education Loan is an enticement for anyone. But it now not as easy as it looks when it appears. The two words Education and Loan gives you the opportunity to grow without the cash in hand but would also come with great responsibility. Let us consider some major basic question if you are naive to the concept.

  1. For which type of education can I avail the Loan?

Major banks and financial institutions give loan for graduation, post-graduation, and overseas studies. There are few banks which also gives loan for vocational courses, under-grad programs and even certificate courses. So, you need to go through homework before finalizing the bank.

  1. What all will be covered under Education Loan?
  • Tuition fees payable at the college or the institution
  • Examination fee and hostel/accommodation fees
  • Books and required equipment charges
  • travel charges in case of overseas study.
  1. How much loan can I get?

If the studies are in the county that is in India, you can get upto 10 lakhs. If it is abroad, you can get upto 20 Lakhs. Again, this depends on the course you opt for, the university you opt for, and the Bank you choose. But Majorly it is the one stated above.

  1. Are there any processing fees for the loan?

Yes, just like every other loan, even the educational loan will have processing fees. For bank to bank it differs from 2.0% to 2.5% of total disbursal.

  1. What are the interest rates for these loans?

The interest in case of educational loans is a little lower compared to other loans. Still, nothing comes free! So generally, the interest range is 9% – 15% for these kind of loans. 1 thing specific here is, if you are already earning, or if you are planning to take any guarantor or co-applicant, the cibil/credit score will help in getting lower interest rates. But if you/they have low cibil score, you may face the hurdles.

  1. What are documents required for this loan?
  • Proof of admission to the college
  • Scheduled fee structure
  • Marksheet of the last examination
  • Photographs
  • If you are earning : your income proof, bank account statement, ITR, list of assets (if you have any)
  1. What in case of guarantor or co-applicant?

If the loan amount is less than or equivalent to 4 lakhs, there is no requirement of a guarantor or co-applicant. But if, it is more than that, banks would want either a guarantor, or a co-applicant or security (in terms of asset, gold, shares, or any other investment).

  1. When do I have to start repaying the loan?

There are 2 cases, either of which when you have to start repaying the loan.

  1. 6 months or 1 year after you complete your studies.
  2. 6 months after you get a job.

Of these possibilities, whichever happens first, you have to start repaying loans from that time.

  1. Will I get any tax benefit when I take this loan?

Under the section 80E of ITA, an individual can opt for rebate on the interest rate of the education loan. Make a note, it is not on the principal amount.

With all these basic information, if you want to go for the loan, let’s start. However, you definitely must have a course in your mind to study!

Can The Credit Score Prevent You From Taking A Home Loan?

Buying your dream home is like achieving a major milestone in your life. After you have done your research and decided on a location to buy your house, the next hurdle that you need to cross is to get the approval of finances. There are various factors that are considered by the lenders to determine your eligibility for the loan. Your credit score is the most important among them. Your credit score is a three digit number that summarises the information in your credit report. Your past repayment history, outstanding debts, credit utilization ratio, credit mix, length of the credit history are some major factors that determine your credit score. All lenders look at this number to understand your financial standing and determine the risk associated with you as a borrower. It gives them a quick impression of your probability of default based on the past behaviour. Most financial institutions have a minimum criteria that one needs to satisfy in order to get approved for the loan. Different banks have different guidelines relating to the minimum credit score that they are willing to accept depending on their risk tolerance. But in most cases, a home loan gets approved if your score is more than 700.

A high CIBIL score is an indication that you have serviced your past obligations diligently. It is a reliable measure of your future repayment behaviour and hence it improves your chances of getting a loan. A low score that does not satisfy the minimum limit set by the bank may lead to a denial. So if you wish to avoid any chances of rejection, you must pay attention to your CIBIL score and ensure that it stays above the 700 mark.

Your credit score not only affects the bank’s approval decisions, but it also determines the home loan interest rate that they will charge. Yes, banks in India are now planning to switch to risk based pricing, where they will charge a lower rate of interest from people with an exceptionally high CIBIL score. They believe that lending to an individual with a fairly high score will be a good investment as he won’t have problems in repaying the debt. Loans for low CIBIL score are available at a higher rate as lending to such individuals is considered as a riskier investment. Bank of Baroda has already announced that it has linked home loan interest rates with the CIBIL rating. So if you maintain discipline in paying your existing loans, your credit score will improve, and you will have to pay a lower EMI on your new loan.

If you are planning to buy your house anytime soon, checking your credit score should be your top priority. Do it at least 6 months prior to filing a home loan application, as it will not only help you gauge your financial standing but also give you enough time to work on your score if it isn’t in a good shape. If may be extremely devastating if you find out that your credit rating is too low to qualify for a home loan. Do not worry, all is not lost. Many peer to peer lending options are available online where you can get loans for low CIBIL score. But these loans will be available at a higher cost. A difference of even half a percentage of home loan interest rate can cost you thousands of more rupees over the life of the loan. It is in your best interest to work on your CIBIL score and improve it so that you can get approved for home loans at attractive rate of interest.

Make sure you make timely repayment of your instalment debts from now on as late payments pull down your score. Get a secured credit card and use it for small purchases every month. Timely payments of the credit card bill will help in establishing a good track record of the payments made that would be reflected in your report. Do not utilize more than 30% of the available credit limit. Check your free credit report every year to ensure that you are moving in the right direction. Also scrutinize your report to make sure it does not have any errors. Sometimes errors on the part of the credit bureau are also responsible for a low CIBIL score. So if you find any discrepancies you can raise a dispute with CIBIL.

Raising your CIBIL score will not happen overnight. But if you focus on taking positive actions you can slowly move up the ladder and make your CIBIL score ready for an easy approval of home loan at attractive interest rates.