Indians’ love for gold ornament and jewellery is known across the globe. India is a country, which is considered the biggest gold importer in the world. Usually, gold is factored in to hold a considerable value and even looked upon as an important source that has the potential of capital increment in the future. But not many are aware that gold can even be used to finance financial exigency requirements like children’s education, medical expenditure, business set-up, vehicle loan’s down payment and even annual trips abroad with family.
When you witness a scene that requires instant cash, you can use the gold lying idle in your locker. Today, most non-banking financial companies and banks offer gold loans. Such loans are handy in nature and can be in a swift and hassle-free way sourced whenever there’s any requirement for instant money. You can avail of a loan against gold that you might possess in any kind or form like gold coins, bars, jewellery, etc.
Here, this article discussed a few crucial benefits provided by gold loans and why individuals must make the most out of it.
What are the important benefits provided by gold loans?
Major advantages of opting for a loan against gold include –
Instant processing – As gold loan contains physical gold as security or collateral form, financial institutions like banks and NBFCs simply provide such loans. In the case of banks, opting for a gold loan is a way safer choice as they can simply sell the gold if the borrower defaults. Hence, banks usually tend to disburse these loans within a few hours. This leads to lesser processing and disbursal time and thus, added convenience for you as an applicant.
Pay interest only route – A loan against gold often may come with a very unique feature that permits you as a borrower to pay the interest constituent while making the loan repayment. The principal constituent can be paid towards the end of the repayment tenure or in the course of loan closure formalities.
Comparatively lower rate of interest – As the gold loan is secured in nature; banks tend to levy a lower rate of interest than unsecured credit options like a personal loan. The lowest gold loan interest rate begins from around 7 per cent per annum onwards. In contrast, personal loan rates usually range between 10 per cent per annum and 24 per cent per annum. For you as an applicant who can offer additional security or collateral, opting for a gold loan deal is a great option.
Zero processing charges – Many NBFCs and banks do not levy any processing charges as gold loans are offered instantly with gold as security or collateral held by financial institutions.
Minimal foreclosure fees – Few lenders and banks either do not levy or hold a minimum prepayment fee of 1 per cent on the gold loan in the case you are serving a fixed interest rate.
Zero income proof required to be furnished – In most apps of gold loans, lenders do not ask you to provide income proof as the loan by nature is secured against gold that you provide as security or collateral.
Zero impact of having a poor credit history – In most loans, banks tend to grant loan proceeds based on the repayment potential and your credit history. However, this isn’t the scenario with gold loans. As gold is pledged as security or collateral, lenders get the assurance of your principal constituent repayment and thus do not depend on your credit history or score for granting you the loan.
Security of the physical gold – The responsibility of maintaining your physical gold safely is that of the financial institution. Normally, financial institutions keep your gold jewellery and ornament in the vault of the bank and thus, you as a borrower do not require worrying about this. Once you repay the loan, gold is returned to you by the financial institution.
It is simple to avail gold loan, but you as an applicant must ensure that you repay the loan EMI timely. If you fail to do so, then the lender may sell your surrendered gold products to avail the principal constituent. So, you must opt for the gold loan only if you are in dire need of urgent funds. Note that financial institutions generally tend to provide the loan proceeds quickly and, in a hassle, free manner. The gold items that you can pledge to avail the gold loan are gold biscuits, bars, jewellery, and coins.
Frequently asked questions or FAQs
What are the crucial benefits of availing a gold loan?
Important key advantages of availing a gold loan include –
∙ Reasonable rate of interest and minimal processing charges
∙ Minimal documentation
∙ Low or zero loan foreclosure fees
∙ High LTV ratio
∙ Flexible repayment loan tenure
∙ Distinct loan repayment choices
Is availing a loan against a loan a safe choice?
Gold loans are looked upon as a safe investment choice. Physical gold might not endow high value or might even be less, however, with the gold loan you as an applicant can make the best use of the availed funds to meet your distinct personal expenses or financial exigencies.
Which financial institution is considered as best for offering loan against gold?
State Bank of India and other public sector banks are considered the best financial institution as they tend to offer lower gold loan interest rates.
Is the gold loan option a better choice than the personal loan option?
A gold loan is considered a better option than a personal loan if you as a borrower can repay the loan in the shorter duration possible. Also, these loan types are known to come with a lower rate of interest owing to their secured nature. In contrast, a personal loan is the preferred choice by you as a borrower because of higher repayment tenure and loan proceeds. Based on individual requirements as well as financial requirements, you as a borrower can select between the two options.
How can you avail a gold loan option?
It is simple to avail a gold loan from a lender either through the online platform or offline. For placing an online application, you need to visit the preferred lender’s official website.