Loan Against Sovereign Gold Bond

Loan Against Sovereign Gold Bond

A loan against Sovereign Gold Bonds is a smart move to borrow money for short-term financial crises. It provides the lender access to hassle-free funding at a considerably-low interest rate compared to traditional loan products.

In times of urgent monetary needs, opting for a loan against SGB can prove to be a judicious and informed choice, providing both immediate relief and long-term financial stability.

In this blog piece, we will discuss what this ingenious borrowing method is, how can you avail of a digital loan against your bond, why you should opt for it, and much more.

What are Sovereign Gold Bonds?

Today, many investors invest in and look ever more inclined to invest in Sovereign Gold Bonds (SGB). They consider it as a preferred investment choice. It is an excellent alternative to investing money in gold without holding gold in physical form.

At the time of redemption, investors receive the current market price of the quantity of gold they have invested in. As the market rises or the price of gold hikes, the value of these bonds increases.

About loan against gold bonds

A loan against gold bonds or SGB gold loan is a loan product that makes cash available in exchange for your bond holdings. It’s an innovative financial solution to meet your varied financial needs. The loan eliminates the need to sell your bonds. This approach proves especially advantageous given the attractive loan against sovereign gold bond interest rates, which are notably lower than conventional options. The bonds you pledge to raise the capital act as collateral. Once you pay back your debt, you can set your pledged bonds free.

How can you avail of a digital loan against bonds?

Only a few investors might know that SGBs can be a savior during financial emergencies. Yes, you heard that right! You can pledge them for a loan against sovereign gold bonds. This loan is easy to access and does not require lengthy paperwork. With financial institutions having a digital presence, the application process, approval, and disbursal are easy, convenient, and frictionless.

It is a type of instant loan against securities protected by collateral in the form of gold bonds. If you choose the digital route, applying it will require only a few steps, depending on the application process of the lender providing the loan. You can avail of it by fulfilling the criteria set by the lender.

Your investment portfolio and soft copies of your KYC documents will be enough to make you eligible for the loan amount of a certain percentage of your bonds. But then, you must find the right lender to crack a better deal.

Why should you opt for a loan against gold bonds?

There are many reasons why a digital loan against bonds is a smart move in need of funds. There they are:

Nominal interest rates

Top of the list is lower interest rates (IR). Many individuals are afraid of taking a loan. Do you know why this is so? High IR is the culprit. Since your bonds secure the loan as collateral, the interest rate is lower than on unsecured loans like personal and credit card loans.

The low IR reduces the overall cost of the loan, making it easy for the lender to repay it. Additionally, when you take a digital loan against bonds, you do not have to pay high processing fees, as with unsecured loans.

Fast processing, approval, and disbursal

Another benefit next to lower IR is that this type of loan is available the same day you need cash. That means it gives you quick access to funds. No sooner do you apply for the loan than the lender starts reviewing and processing your application. If you meet the requisites and agree to the loan terms, the loan amount gets disbursed into your account.

It does not take days to get the loan approved. Not surprisingly, some lenders make disbursal possible as early as four hours. So, there could be no better alternative to a loan against sovereign gold bonds.

Easy repayment options

A loan against sovereign gold bonds gives you the facility to pay back the loan amount in easy EMIs at your convenience. You may either pay back the loan within the tenure or earlier. And if you repay the loan early, you can save on interest rates.

Like other loan options that include additional pre-closure charges, an SGB gold loan comes with no prepayment charges. But for that to happen, you need to choose the lender prudently, as not all lending institutions have zero pre-closure fees.

High loan-to-value (LTV) ratio

Lenders offer a high LTV ratio for loans against SGBs, meaning borrowers can access a higher loan amount against their investments. Since a loan against bonds gives you a higher credit limit, you can use it to meet your varied requirements.

This advantageous feature makes the loan a practical choice for those requiring funds against their gold bonds without liquidating their assets. The good thing about this loan facility is that borrowers do not lose the ownership of their SGB holdings.

Eligibility Criteria and documents required For Loan Against SGB

Depending on the lender, different requirements may apply for qualifying and documentation for a Loan Against Sovereign Gold Bonds (SGBs).

Eligibility Criteria

  1. Ownership of SGBs: Reserve Bank of India-issued Sovereign Gold Bonds must be registered in your name.
  2. Loan Amount: Up to a certain level, the loan amount may be expressed as a percentage of the SGBs’ current market value that have been pledged.
  3. Loan Tenure: Loans secured by SGBs are usually short-term, and each lender may have a different tenure.
  4. Lender Guidelines: It’s vital to confirm the specific qualifying conditions with the lender immediately as they may differ across them.

Document Required

  1. Identity proof: options include voter ID, PAN cards, passports, and Aadhaar cards.
    Aadhar Card, Passport, Voter ID, Utility Bills, etc. are examples of proof of address.
  2. The SGB certificate or other pertinent papers can serve as ownership proof for SGBs.
  3. Bank statements: Typically, for the previous six months.
  4. Income Documentation: Pay stubs, income tax returns, etc.
  5. Other documentation: Any other documentation the lender specifies.

For the most correct and current information regarding eligibility and documentation for a Loan Against Sovereign Gold Bonds, it is recommended that you get in touch with banks, financial institutions, or NBFCs directly.

To conclude

All this makes a loan against sovereign gold bonds a smarter way to borrow money. This type of loan is fast, flexible, and convenient for everyone having SGB holdings. However, you should ensure that you pay back the loan on time. It will help you avoid additional charges and penalties and the loss of your investments.

So, the next time you fall short of cash, irrespective of what you need funds for, approach a trusted lending institution, such as Abhi Loans, to get access to quick capital against your gold bonds.

Frequently Asked Questions

1. What is a loan against sovereign gold bonds?

A loan against sovereign gold bonds allows you to borrow funds using your gold bonds as collateral. This unique approach lets you access money without selling your bonds, offering financial flexibility while retaining your investments.

2. How does the loan process work?

When you apply for an SGB gold loan, the lender assesses the value of your bonds and offers a loan amount based on their worth. Your bonds act as security, and once you repay the loan, they’re returned to you.

3. What are the benefits of this type of loan?

A loan against SGB offers lower interest rates compared to traditional loans. The high loan-to-value ratio provides access to larger loan amounts. Moreover, you can address financial needs without losing ownership of your valuable gold bonds.

4. Are there risks involved in such borrowing?

While the risks are minimal, it’s crucial to repay the loan on time to avoid penalties or loss of your bond holdings. Responsible repayment ensures you maximize the benefits without encountering any adverse consequences.

5. Can anyone apply for a loan against gold bonds?

Individuals who own sovereign gold bonds can typically apply for this loan. The eligibility criteria might vary from one lender to the other, but owning these bonds is the primary requirement to access this smarter borrowing option.