Are you planning to avail gold loans? Remember these points

Pledging gold as collateral to meet financial needs has been a constant feature of the Indian gold market. Traditionally, households use gold loans to meet costs of health, education and marriage while small businesses use them for their working capital needs.

Hyderabad:When money is needed many people hold gold as collateral and take loans from various financial institutions. While taking the loan the name of the nominee has to be informed. But, some types of loans do not require a nominee's name.

Nominee for gold loans:Gold is an immediate reminder of any financial emergency. Many people take loans from banks and financial institutions as collateral. In some cases, there are problems with not naming the nominee when taking such a loan. Some precautions must be taken to avoid such implications for borrowers.

The nominee's name is usually used for a bank account, Demat, insurance, fixed deposits and all other investments. However, some types of loans do not require a nominee's name. When something unexpected happens to the borrower .. the nominee is able to claim the guaranteed gold. Implications come in the absence of a nominee's name. In most cases, the family members of the borrower do not have information on where the gold is mortgaged.

The borrower has to repay the loan within a year and must pay interest monthly to banks or financial institutions from where they have taken loans. Gold loans are considered non-performing assets if the interest and principal amount are not paid after a certain period.

If the heirs do not bother with the notices from the banks and the financial institutions, the companies will auction the gold. Even if the family members find out about the loan and contact the banks/financial institutions and repay the entire loan, a legal heir certificate is required.

Banks made the entry of nominees mandatory while taking gold loans, but some non-banking institutions are reportedly not following that rule. See if you have already entered the nominee's name while taking the loan. Otherwise, contact the bank and enter those details. New borrowers should not forget to write the name of the nominee.

Read:Now, you can borrow more against gold