The coronavirus pandemic put financial stress on almost every individual.
People were forced to sell off their assets such as gold, properties, cars, mutual funds, and even business equipment to make ends meet.
According to the World Gold Council, approximately 142 MT of gold was recycled in India between April 2020 and December 2021.
Selling off valuables can be heartbreaking, especially if it involves parting ways with gold jewellery received in inheritance over generations. It also deprives the owner of the future price rise in the asset.
A wiser way of using one’s gold possessions for cash is by taking a loan against gold.
There are several reasons why gold loans are the best to meet financial needs.
- Low-interest rates: Gold loans are secured loans, and the lenders keep the borrowers’ gold possessions as collateral. A gold loan borrower’s default would not hurt the lender financially because he can auction the pledged gold and recover his losses. As lenders have the back-up of the customer’s gold, they offer a loan at a lower interest rate than other unsecured loans. Muthoot FinCorp offers gold loans at the lowest gold loan interest rate to customers, starting at only 11.99% per annum.
- Instant processing and disbursal: Gold loans have fast processing and are disbursed quickly. The customer can walk into the lender’s branch and offer his gold possessions for valuation. Once the lender values the gold and documents are submitted, the loan amount is transferred to the borrower’s bank account within minutes.
- No restriction on end-use of the loan amount: Loans like housing loans and automobile loans have a fixed purpose for which the loan amount can be used. A gold loan amount can be used for any kind of financial requirement by the borrower. It can be a business or personal requirement. The borrower can use a part of the loan amount on a certain expense and another part on something else.
- Facility to borrow small or large amounts: Usually, business loans, personal loans, etc., are not offered for amounts less than Rs. 1 lakh. It is not the case with gold loans. With Muthoot FinCorp, customers can take a loan amount as small as Rs. 1500, and it can go up to Rs. 50 lakhs, depending on the value of the gold pledged.
- Basic documentation: Other loans like personal loans require a series of documents like the credit score, income proof, income tax return statement, etc., from the borrower. But for a gold loan, the customer needs to submit only his identity proof and address proof as documents. It takes away the hassle of arranging documents and proofs during financially pressing times.
- Flexible repayment options: Gold loans come with a unique repayment option. The customer can pay only the interest during the loan’s tenure and pay the principal loan amount at the time of closing the loan. Muthoot FinCorp lets the borrowers pay back the loan in monthly instalments or bullet payments.
- No foreclosure charges: If customers want to repay their loan before the end of the loan tenure, they have to pay foreclosure charges to the lender. It increases the cost of the loan. Muthoot FinCorp charges zero foreclosure charges from the customer after three months of sanctioning the gold loan.
- Higher loan amount: The value of the gold loan amount depends on the value of the gold the customer pledges. Muthoot FinCorp offers up to 75% of the pledged gold’s value as a loan for the lowest gold loan interest rate.
- Low processing fee: The lender charges a processing fee on all kinds of loans, which is a percentage of the loan amount sanctioned. The processing fee is above the interest charges and adds to the loan’s cost. Gold loans have a low processing fee. Muthoot FinCorp charges only Rs. 20-0.25% as processing fee on gold loans.
- Easy eligibility criteria: The eligibility criteria for a gold loan is easy to meet. It makes taking a gold loan feasible for customers. With Muthoot FinCorp, the customer needs to be between 18 and 65 years to apply for a gold loan, and the gold pledged by the borrower should be between 18 and 24 karats.
On taking a gold loan, customers do not need to worry about the safety of their gold valuables. Lenders keep the pledged gold under constant surveillance in secured vaults. Once the customer pays back the loan, he or she can get back their gold valuables immediately.