Falling gold prices may spell opportunities for some of you who are savvy investors and have a view on gold. But if you have a gold loan or a gold loan overdraft then your woes may have already begun with falling prices.
Gold loan lenders may have asked you for additional collateral or demand that you prepay a part of the loan (as the value of gold your pledged would have declined in value) or worse come, auction the pledged gold. The pain is more if you have a gold loan overdraft facility with banks.
Gold loan overdraft facility typically provide you with a limit (based on the value of gold you pledged, after providing for some margin) up to which you can draw funds. You will pay interest on the amount you overdraw. This is like any other overdraft facility but the overdraft limit will change based on periodic valuation of gold made by the bank.
That means if gold prices fall, your OD limit will come down and you would be asked to pay back any excess amount overdrawn. Such a scenario is being played out in recent times.
With gold prices falling sharply, overdraft borrowers, who borrowed to the hilt, have been asked to repay a part of the amount they withdrew from their earlier (higher) limit. Some banks charge as high as 18% p.a on the amount drawn in excess of the limit, once the OD limit is set lower after revaluing the gold.
Hence be wary when you availing gold loan overdraft facilities. Ensure that you are not overdrawing the entire limit at one shot. You may not be prepared to repay when any unexpected demand comes from your bank. Taking a personal loan to pay this will only land you in a tangled web of high interest rate loans.
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M’am, you have correctly chosen a current topic at this correct time upon which I want to submit my personal views. Thanks also to “fundsindia.com” providing me opportunity vide forwarding me aforesaid article recently written by M’am. I have gone through the aforesaid article in its entirety. It is quite informational as well as beneficial alerting people as the things stand by today.
It’s really unfortunate situation falling sharply the Gold prices recently, in the month of April, 2013 resulting into a dilemma to the both sides’ viz. loan-lenders and loan-borrowers, because of reliance of both parties upon Gold. Conversely, adverse reports are also available on the net with anticipation of further more fall in the prices of gold that apprehends drastically who is already involved in whatsoever manner in Gold either directly or indirectly. On the other hand, mass of peoples who had their plans to buy Gold at higher levels for their ceremonial purposes or otherwise, are now relaxed with correction in the Gold prices and in fact, they are happy and should be, since it was totally unexpected for everyone.
And for those who are against of import of Gold in India for their valid reasons, I take an opportunity by submitting that Gold in India is not meant only as commercial-commodity for transactions or merely investment module rather it is something above in the sense it is taken and that part is called “Sentiments”. Sentimentally, it is attached with our heart, religion, emotions, status, expressions, jealousy, pleasure and for many other countless reasons which could easily be understood by those who restore their-selves in Gold.
Needless to say that Gold in shape of ornaments or jewelry, especially for women, is also of great concern for them emotionally. Truly, speaking from my heart, everyone understands this fact. Now, if, the Gold is pledged for obtaining a loan amount under the compelled/odd circumstances in order to meet out certain requirements in the day to day life, and loan lender, thereafter of providing the loan amount, suddenly, urges to the borrower to maintain the margin by paying back some money to him out of the loan amount provided alongwith hefty interest rate charged by him to the tune of 18% p.a., would it not be an attack of harassment on the innocent loan-taker in dual ways viz. (i) sentimentally disgracing the borrower as well as (ii) commercially its unfair. I am constrained to think that what is fault of a borrower at time of approaching the lender. His/Her fault is only that obtained a loan amount by pledging the Gold under the compelled circumstances. It would not be brushed aside so lightly or summarily that someone obtains a loan under some financial stringencies to meet out his monetary requirements, otherwise, who would like to obtain a loan amount on such aforesaid hefty rate of interest offered by a loan-provider. It is fundamentally stated that for earning higher income rates, you have to take more risks.
The loan-provider ought to have taken into consideration by keeping in mind the risk factors of business and fixing of margin percentage prior to evaluating the golden ornaments for loan, sanctioning and dispersing the same. Just two months back, lots of efforts were made by the renowned companies and bankers finding needy persons to provide them a Gold loan because it is designated authoritatively “A Safe-Haven Asset”. Earlier to, the loan provider was bullish towards Gold side by keeping in view uninterrupted upward trend for more than of a decade; Now what happened to him? Whether, he has changed his stand being earlier he was bullish and now he is bearish? It’s wrong conclusion.
To my mind, if, he disposes of the entrusted jewelry which is pledged at some relevant time under some written agreements when he was bullish towards Gold side and now only for the reason, the prices are sharply fallen, he has got the rights to threat the borrower to maintain the margin otherwise he will sell out the entrusted gold ornaments at the prevailing rate in the market. It would be unfair on the part of loan-lender. It may amount to “breach of trust”, speaking morally as well as legally, may lender indulges himself within clutches of Section 406 IPC.
However, commercially, lender may be apprehending for his somewhat plausible reasons (i.e. crack in Gold prices) for urging to maintain the margin by borrower and in eventuality of his failure, he will be constrained in selling out the pledged ornaments with him which may be of a great concern of someone’s “emotions” who entrusted his/her valuable golden ornaments in good faith for obtaining a loan amount with a commitment to repay back at appropriate time according to his/her personal circumstances alongwith interest rate agreed upon by the both parties by maintaining the same. I reiterate that Gold in India is not meant only as commercial-commodity for transaction but equally it is attached sentimentally with us, as stated above. Gold ornaments are also presented in the case of a gift by adolescent to his Fiancée (vice versa) to impress each other.. etc. etc….
The money-lender ought to show co-operation under such circumstances if a borrower behaves fairly and honestly, and loan-lender should not make accused the borrower for no fault of him in bringing down the Gold prices and compelling them to maintain margins or face the consequences.
Moreover, the prices crashed recently is in the hands of speculators in order to generate Short term profits, as per World Gold Council (WGC) report dated 19-4-2013 at the following link :
http://www.moneycontrol.com/news/commodities/speculatorsfutures-markets-caused-gold-price-crash-wgc_855555.html
Best Regards.
Sudhir Kapoor.
M’am, you have correctly chosen a current topic at this correct time upon which I want to submit my personal views. Thanks also to “fundsindia.com” providing me opportunity vide forwarding me aforesaid article recently written by M’am. I have gone through the aforesaid article in its entirety. It is quite informational as well as beneficial alerting people as the things stand by today.
It’s really unfortunate situation falling sharply the Gold prices recently, in the month of April, 2013 resulting into a dilemma to the both sides’ viz. loan-lenders and loan-borrowers, because of reliance of both parties upon Gold. Conversely, adverse reports are also available on the net with anticipation of further more fall in the prices of gold that apprehends drastically who is already involved in whatsoever manner in Gold either directly or indirectly. On the other hand, mass of peoples who had their plans to buy Gold at higher levels for their ceremonial purposes or otherwise, are now relaxed with correction in the Gold prices and in fact, they are happy and should be, since it was totally unexpected for everyone.
And for those who are against of import of Gold in India for their valid reasons, I take an opportunity by submitting that Gold in India is not meant only as commercial-commodity for transactions or merely investment module rather it is something above in the sense it is taken and that part is called “Sentiments”. Sentimentally, it is attached with our heart, religion, emotions, status, expressions, jealousy, pleasure and for many other countless reasons which could easily be understood by those who restore their-selves in Gold.
Needless to say that Gold in shape of ornaments or jewelry, especially for women, is also of great concern for them emotionally. Truly, speaking from my heart, everyone understands this fact. Now, if, the Gold is pledged for obtaining a loan amount under the compelled/odd circumstances in order to meet out certain requirements in the day to day life, and loan lender, thereafter of providing the loan amount, suddenly, urges to the borrower to maintain the margin by paying back some money to him out of the loan amount provided alongwith hefty interest rate charged by him to the tune of 18% p.a., would it not be an attack of harassment on the innocent loan-taker in dual ways viz. (i) sentimentally disgracing the borrower as well as (ii) commercially its unfair. I am constrained to think that what is fault of a borrower at time of approaching the lender. His/Her fault is only that obtained a loan amount by pledging the Gold under the compelled circumstances. It would not be brushed aside so lightly or summarily that someone obtains a loan under some financial stringencies to meet out his monetary requirements, otherwise, who would like to obtain a loan amount on such aforesaid hefty rate of interest offered by a loan-provider. It is fundamentally stated that for earning higher income rates, you have to take more risks.
The loan-provider ought to have taken into consideration by keeping in mind the risk factors of business and fixing of margin percentage prior to evaluating the golden ornaments for loan, sanctioning and dispersing the same. Just two months back, lots of efforts were made by the renowned companies and bankers finding needy persons to provide them a Gold loan because it is designated authoritatively “A Safe-Haven Asset”. Earlier to, the loan provider was bullish towards Gold side by keeping in view uninterrupted upward trend for more than of a decade; Now what happened to him? Whether, he has changed his stand being earlier he was bullish and now he is bearish? It’s wrong conclusion.
To my mind, if, he disposes of the entrusted jewelry which is pledged at some relevant time under some written agreements when he was bullish towards Gold side and now only for the reason, the prices are sharply fallen, he has got the rights to threat the borrower to maintain the margin otherwise he will sell out the entrusted gold ornaments at the prevailing rate in the market. It would be unfair on the part of loan-lender. It may amount to “breach of trust”, speaking morally as well as legally, may lender indulges himself within clutches of Section 406 IPC.
However, commercially, lender may be apprehending for his somewhat plausible reasons (i.e. crack in Gold prices) for urging to maintain the margin by borrower and in eventuality of his failure, he will be constrained in selling out the pledged ornaments with him which may be of a great concern of someone’s “emotions” who entrusted his/her valuable golden ornaments in good faith for obtaining a loan amount with a commitment to repay back at appropriate time according to his/her personal circumstances alongwith interest rate agreed upon by the both parties by maintaining the same. I reiterate that Gold in India is not meant only as commercial-commodity for transaction but equally it is attached sentimentally with us, as stated above. Gold ornaments are also presented in the case of a gift by adolescent to his Fiancée (vice versa) to impress each other.. etc. etc….
The money-lender ought to show co-operation under such circumstances if a borrower behaves fairly and honestly, and loan-lender should not make accused the borrower for no fault of him in bringing down the Gold prices and compelling them to maintain margins or face the consequences.
Moreover, the prices crashed recently is in the hands of speculators in order to generate Short term profits, as per World Gold Council (WGC) report dated 19-4-2013 at the following link :
http://www.moneycontrol.com/news/commodities/speculatorsfutures-markets-caused-gold-price-crash-wgc_855555.html
Best Regards.
Sudhir Kapoor.
Nice insights about the OD limit related to gold loan! Very few people will be aware of the fact that OD limit can affect your loan so harshly. If you want more insights about gold loan please visit Bajaj Finserv http://www.bajajfinserv.in/finance/gold-loan/salaried-gold-loan.aspx
Great content regarding gold loans. The point you sharing “OD limit” every loan payer or invester should be know about that.
Thanks for such a great content.
Great content regarding gold loans. The point you sharing “OD limit” every loan payer or invester should be know about that.
Thanks for such a great content.
Nice insights about the OD limit related to gold loan! Very few people will be aware of the fact that OD limit can affect your loan so harshly. If you want more insights about gold loan please visit Bajaj Finserv http://www.bajajfinserv.in/finance/gold-loan/salaried-gold-loan.aspx