India is a major gold importer. Gold is seen as a valuable commodity with the potential for future capital growth. Many people are unaware, however, that gold can be used to cover any unexpected cash needs, such as medical bills, children’s schooling, business start-up, vehicle down payments, and even yearly family vacations.
You can use the gold in your bank locker if you find yourself in a scenario where you need money quickly. Gold loans are now available from a slew of banks and non-banking financial institutions (NBFIs). When you require emergency funds, these loans may be useful and can be arranged without difficulty. You can acquire a loan against gold in any form, including jewelry, gold coins, gold bars, and so on.
Benefits of gold loan
Because loans against gold are secured loans, they have fewer eligibility requirements and require less documentation. To grant a loan, doesn’t even ask for a credit score. As a result, lenders typically release loans within a few hours. Those who qualify for an online gold loan might receive their funds in as little as a few minutes.
Lower interest rate
Gold loans have a lower interest rate than unsecured loans like personal loans because they are secured loans. The gold loan interest rates might also be reduced if you use another asset as collateral.
A Gold Loan’s documentation requirements are less stringent than a Personal Loan’s. The only documents that must be produced are the KYC documents. Because the loan is secured against the gold to be kept with the bank, most lenders do not require income proof.
No processing fee
Many banks and NBFCs do not charge any processing fees because gold loans are provided quickly with gold as collateral stored by the bank.
No impact of low credit history
Most loans are granted based on the borrower’s ability to repay and credit history. Gold loans, on the other hand, are not in this category. Because gold is used as collateral, lenders are confident that the primary component will be paid back, and hence do not base their decision on the borrower’s credit history.
Safety of gold
The lender is in charge of keeping the physical gold safe and secure. Borrowers do not need to be concerned because it is usually stored securely in the bank’s vault. When the bank receives payment for the loan, it returns the gold.
Flexible repayment tenure and high LTV ratio
Another advantage of a Gold Loan is that repayment terms are adjustable. This loan has a minimum and maximum repayment period of 6 months and 24 months, respectively. Furthermore, you can acquire a maximum Loan to Value ratio of 75% of the computed gold weight.
In most Indian households, gold remains the most preferred investment option. Furthermore, the steady rise and fall in gold prices provide investors with numerous opportunities to acquire the shining metal. In the long run, gold can be an advantageous way to obtain a loan. It is reasonable to conclude that taking out a loan against gold assets is a better investment than taking out a personal loan.
Gold loans, like personal loans, cater to a wide range of needs. Gold loans can be used to pay off some high-cost obligations, such as credit card debt, that are a source of frustration for regular borrowers. These can be helpful in a variety of situations, including generating funds for medical emergencies or paying for a child’s education. To meet their working capital needs, businesses can take out gold loans and apply for an overdraft against their gold assets.