Protect Your Gold Loan Collateral With These Tips

If you’re planning to take a gold loan, it is understandable for you to be concerned of its safety while it is with the lender. To put your mind at ease, here are some tips you can follow

The first step to ensure the safety of your gold is to choose a trusted and reliable lender

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Gold loans are a convenient and increasingly popular solution for accessing funds quickly. Whether it’s an emergency or a planned expense, a gold loan can be useful, allowing you to pledge gold to secure a loan. The popularity of gold loans has seen an uptick in the past few years. According to Moneymood, a recently published report summarising personal finance trends from 2024 reported that gold loans have surged by a massive 56% over the last year, marking the fastest growth in the secured loans category. 

If you’re planning to take a gold loan, it is understandable for you to be concerned of its safety while it is with the lender. To put your mind at ease, here are some tips you can follow before choosing a gold loan to ensure your wealth is in safe hands.  

Choose A Trusted Lender

The first step to ensure the safety of your gold is to choose a trusted and reliable lender. When comparing lenders, prioritise reputed banks or Non-Banking Financial Companies (NBFCs) with a proven history of dealing in gold loans. The reason behind this preference is that such institutions, given their prior experience, generally tend to adhere to stringent procedures and provide secure vault facilities to ensure the safety of your pledged assets.

Learn About The Lender’s Security Measures 

When comparing lenders for gold loans, it’s crucial to inquire about their security measures. As a borrower, give preference to lenders who deploy robust security measures to safeguard your assets. Look for features such as secure, insured vaults and digital tracking systems to ensure your gold is well-protected. The safety of your collateral should be a top priority, and choosing a lender who prioritizes this can give you peace of mind for the loan tenure. 

Check For Insurance Coverage 

Lenders who offer gold loans typically insure the gold against loss, theft, or damage. However, as a borrower, it is important that you confirm the extent of the coverage being provided by the lender. For enhanced protection against unfortunate events, consider getting additional insurance. 

Keep Documentation Safely 

Documentation is a key aspect of any loan agreement and should be stored securely. Make copies of all gold loan-related documents, such as the loan agreement and receipts, and keep them safe. These documents serve as proof of your gold's description and value, and are essential for resolving any potential disputes. They also ensure the recovery of your gold after the loan is fully repaid.  

Repay On Time To Avoid Losing Collateral

Timely repayments are crucial when it comes to secured loans like a gold loan. If you miss payments or default on the loan, the lender may have the right to auction your gold to recover their dues. Avoid losing your collateral and damage to your credit score by repaying the loan in time. 

Explore Digital Gold Loans 

Digital gold loans are a popular alternative to gold loans, and offer great convenience. Unlike traditional gold loans, you can apply for a digital gold loan online and submit details of the gold you want to pledge. The lender then evaluates the gold at your home, and upon successful verification, stores it in secure vaults and disburses the loan digitally. This entire process eliminates the need for branch visits while allowing you to monitor the safety of your gold via secure mobile apps. 

Watch Out For Changes On Lender’s Policies

Lenders may change their loan-related policies from time to time. To ensure you are fully aware of how your gold is being handled, make sure you stay informed about changes to storage and security measures and procedures made by the lender. In case of any changes, approach the lender to understand what these changes are and how they affect the safety of your collateral. 

Ensuring the safety of your collateral is crucial if you’re taking a gold loan. Choose a trustworthy lender, verify their security practices, and keep your documentation safe to protect your gold and peace of mind. 

(The author is the CEO of BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)