Gold loans are an excellent option to meet your urgent financial requirements. Unlike instant credit card loans and personal loans, where you will have to repay in installments, you can pay back the loan amount in one go. Moreover, when you apply for a gold loan, you get to choose your repayment period from 1 month to 24 months.
Here are some of the key benefits of applying for a gold loan:
As a lender, you do not need to provide any other collateral/security other than your gold ornaments. Lenders may ask for a list of documents that include proof of identity (such as your PAN card, Voter’s ID or Aadhar Card) and address proof.
Faster processing time:
Lending based on gold reserves increases the security for a lender as it is considered a safe asset. This allows lenders to provide loans almost instantly from the borrower account, which reduces processing time and speeds up the loan disbursement.
Convenience and flexibility:
Gold loans have various advantages, with the biggest one being their flexibility. In terms of loan amounts, the gold jeweler who provides you a gold loan can either lend an amount based on the current value of your gold or value it at a higher price and offer you a bigger loan amount so as to cover all your urgent financial requirements.
Lower interest rates:
Gold loan is a type of loan provided on the basis of gold. It is called a secured loan as the borrower has to deposit his or her gold as collateral against the loan. This means that if the borrower falls behind in payments or defaults, the lender can sell the deposited gold to recover their loss. Since this is the secured loan, lenders charge a lower rate of interest as compared to personal loans. Although it varies, the interest rate for a gold loan varies from lender to lender and ranges between 9.24% and 17%, along with additional processing fees. The amount of money you will get depends on how much gold you deposit as collateral.
Balanced credit mix:
Loan against gold is a secured loan type that lets us create an additional income by using our gold item as collateral. As the name suggests, you get an unsecured loan and we can use gold as collateral for the same. Not only will this help us get funds when needed quickly, but also improve our credit score. Our credit rating would see a positive change due to the good credit history of our gold items.
Shorter loan tenure:
One of the most popular short-term loans that lenders provide is a loan against gold. This is because you can get your loan fast with convenient monthly installments, as short as one month. The tenure for this type of credit is flexible and depends on your lender.
A gold loan is a great way to earn money on your savings. However, one needs to be cautious while taking a gold loan. In the event of non-payment, lenders can take action by levying higher interest rates, by auctioning your gold items in order to recover outstanding amount. If you are going to take a loan against gold, here are two tips to help you stay credit-conscious and credit-savvy:
Remember to avail of credit responsibly:
Dealing with gold loans can really be tricky and risky. Make sure you go through the terms and conditions before accepting them. Only apply for the amount you really need as opposed to the amount you want because of hidden or monthly charges.
Use it to build your CIBIL Score:
Your lender will report your loan repayments back to CIBIL, and other credit bureaus. Timely repayments can help you build a better CIBIL Score. Other factors like your occupation, salary and debt also determine your CIBIL Score, so remember to pay on time and keep an eye on all your loans.
Gold loans are a great way to get quick access to credit without involving any paperwork. Gold is also an ideal investment opportunity as it keeps its value over time so you can sell it off whenever you need funds in the future. Please ensure that you read through the fine prints and gain enough knowledge about the product before signing up for it.