Silver Loan Procedure, Merits, and Demerits Explained

“It is all about perspective “. When it comes to debt and loans people have different perspectives and opinions about it. Some think of loans in a very negative way where as the others think of it in a very positive way. So we can say people have strong opinions about the term ‘Loan’. To state it in simple words , Loan is a medium through which you can acquire or purchase something at present or today which you can not afford. Some people go for this option and on the other hand there are many people who are more comfortable waiting until they can finally afford it. We are all aware of the different occupation groups. People who work a 9 to 5 job get a fixed salary every month. But there is an occupation that requires to invest your money first and then get the returns. It is ‘Agriculture’. It takes a lot of capital to grow crops. They have to invest in various electric appliances, tractors, pesticides, etc.

One can buy new machines or in case where some people can also go for used machines approx 5 to 7 years old which are in the right state to acquire. The prices have literally reached the sky and it is not possible for every one to afford all of this. It is not just the rising prices but also the natural calamities like drought that affect their income. They have to survive extreme rain conditions, droughts and there are times when they even lose everything. The most they are worried about is raising the capital. Because it is difficult to fund even with family land and equipment.This brings us to a very affordable and one of the best schemes for farmers which is ‘Silver Loan’.

What exactly is Silver Loan ?

We are very much aware of the gold loan but not many people know that they can get a loan against their silver jewellery or coins as well. But not everyone can get a loan against their silver jewellery or coins. People who are only engaged into agriculture or activities allied to agriculture are eligible for a silver loan. Now these allied activities should be permitted by GOI that is Government of India and the RBI that is Reserve Bank of India under the category allied agricultural activities. People who are indulged into activities that qualify this criteria are accepted for a silver loan.

Poultry and fisheries come under the allied agriculture activities. Now we know that this loan is only given to people who are engaged in agri related activities hence the main purpose of this is to use the money for raising a capital for farming purposes, meeting the crop production requirements or expenses and also can be used for raising assets for the allied farming operations such as dairy, poultry, fisheries , etc. Now when you opt for this loan your farming requirements will be verified. The loan will be based on the scale of requirements of finance for crop production or other purposes. However you will have to enter your required amount in the application form. Then this amount provided by you will be verified and then approved.

What are the types of silver loan ?

There are two types of silver loan –

1. Short term production credit. This type of silver loan is granted to the people who are in need of money on a short term basis. This is usually taken to meet their agricultural production requirements by farmers. The short term production credit silver loan can be granted as UGC or on cash credit or even as a short term loan. Usually the time to repay the loan is upto a year that is 12 months or even at times less than 12 months.
2. The second type is ‘Term Loan‘. This term loan is for a longer period more than a year. Term loan is usually taken up by people who are engaged in agricultural activities or even the allied activities like poultry, fisheries, dairy , etc and are planning to raise their assets or at times even for buying equipments for crop production purposes. The time period for a term loan is in a bracket from 36 months to 60 months. So the minimum time period for this term loan is upto three years and the maximum a person can go is for or upto five years.

It is advisable to people to look at their requirements and then make an accurate decision to go for or choose between either short term silver loan or term silver loan which ever best suits their requirements and is the most convenient to them. In most cases the minimum amount for the silver loan granted is upto one lakh and the maximum amount given to meet the crop production requirements is upto five lakhs. The most important thing to note for the people who want to go for a silver loan is that the loan will only be given against pure silver jewellery and not against silver vessels or articles.

The types of repayment of silver loan can be done in three forms which are as follows-

1. Cash credit or overdraft. The limit on cash credit accounts is for a period of five years on the line of UGC scheme. This is also subjected to annual review.
2. The second type of mode of repayment lies under the demand loan. Where in one can repay the loan only under 18 months. So the limit is extended only up to 18 months and this should not be exceeded.
3. The third and the final mode of repayment is on the term loan where in the time period to pay back the taken amount will be fixed but this limit will not be extended after three years. So the limit set for term loan repayment can only extend upto a time period of 3 years.

Documents Required for Silver Loan

You can get silver loan from banks or other financial institutions. There are certain documents required which are as follows-

1. Proper DNP note.
2. A letter of continuity.
3. Hypothecation of agreement.
4. Letter of general lien and set off.
5. Hypothecation of assets other than agriculture.
6. Agreement for pledge of ornaments.
7. Undertaking form borrower /Guarantor for disclosure to CIBIL and any other document stipulated in sanction.

Before going for a silver loan you should be aware of the advantages and the disadvantages of the silver loan. One of the major advantage is that you do not require a proper credit score or even a guarantor. It is the most beneficial for people who have silver jewellery or coins through which they can take advantage of the many benefits like lower interest rates. Silver loans are less expensive than going for a personal loan regarding focus rates. One of the disadvantages is that the silver required should be absolutely pure silver. You will receive notice throughout. The time period of repayment is also limited. But looking at all the points and considering everything silver loan can be a better choice but one has to always analyse his or her requirements before opting for a silver loan. SBI, Bank of Baroda, Union bank of India and many other banks provide silver loans. One should always compare the interest rates of all the banks available before going for or choosing to take silver loan.

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