The world around, Indians are renowned for their passion for gold. One of the major gold importers in the world is India. Gold is regarded as having significant value and as a potential source of future capital growth. Few people are aware, however, that gold can also be used to cover any emergency cash needs, including medical bills, child care costs, company startup costs, down payments for car purchases, and even yearly family vacations.
You might use the gold that is sitting unused in your bank locker when a scenario arises that demands immediate cash. Gold loans are now widely available from banks and non-banking financial institutions (NBFIs). Anytime immediate cash is required, these loans can be accessed easily and in a useful manner. You can obtain a loan against any gold that you own, including jewellery, coins, bars, and other forms of gold.
What advantages can gold loans offer?
Quick Processing:
Banks and other lending institutions may easily offer gold loans because the collateral is actual gold. Since banks can readily sell the gold if the borrower defaults, lending against gold is a safer choice for them. As a result, banks frequently grant these loans in a matter of hours. Because of the shorter processing time, borrowers will have greater convenience.
Pay only interest option:
Gold loans frequently have a special provision that enables the borrower to pay back the loan with just the interest. At the conclusion of the loan term or during the loan’s closing procedures, the main component may be paid.
Lower interest rate:
Banks charge a lower gold loan interest rate on secured loans like gold loans compared to unsecured loans like personal loans. Gold loans have interest rates between 13% and 14%. Personal loan interest rates, however, often vary between 15% and 20%. The bank will lower the interest rates on gold loans for applicants who can offer more security.
Zero processing fee:
Since gold loans are granted promptly with gold as collateral stored by the bank, many banks and NBFCs don’t charge any processing costs.
Minimal foreclosure charges:
On gold loans, several banks and lenders either don’t issue prepayment penalties at all or just charge them at a nominal rate of 1%.
Income proof not required:
Since the loan is backed by the gold the borrower has committed as collateral, lenders often do not request income documentation from borrowers.
No impact of poor credit score:
In the majority of loans, the bank determines loan amounts based on the borrower’s capacity for repayment and credit history. With a gold loan, though, this is not the case. Due to the fact that gold is used as collateral, lenders are confident in the repayment of the principal amount and do not depend on the borrower’s credit history when approving loans.
Security for physical gold:
The lender is in charge of securely maintaining the physical gold. Borrowers don’t need to worry about it because it is often kept safe in the bank’s vault. Prior to approving the loan, the bank returns the gold to the borrower.
Conclusion
Gold loans are simple to obtain, but borrowers must ensure that they pay back the loan on time or risk having to forfeit their gold to the bank. Since the payout process is typically quick and simple, borrowers can obtain a gold loan from any gold loan provider of their choosing.
