Indians were always fond of gold, and they consider it to be a safe store for their funding needs. People have the gold of any form in their household, and they use it at times as a funding source. Investing in gold is always something pleasing to do as well as the best thing to help you in future. The liquidity rate is higher in investment with gold than other investment options.
Suddenly when you are in need and want immediate funds, then you will apply for a gold loan. It is not only because gold is always available for you at home but also because it offers lower interest rates.
What is a Gold Loan?
A gold loan is a form of secured loan where you pledge your gold as collateral. When you place your yellow metal, the financial provider will check the purity of it. Once the gold purity check is over, they will offer between 60 to 90% of its value as the gold loan amount. The LTV (Loan To Value) ratio varies from lender to lender.
Depending upon the LTV ratio and your needs, you can get the loan amount you want. The interest rate for gold loans is less when compared to that of other loan types. Also, the tenure and repayment options for a gold loan are more flexible than other loan types.
Why A Gold Loan Is The Best Source For Meeting Financial Needs?
When you are in a financial emergency, you will need to get funds quickly. Though there are other secured loan options, gold loan is the quickest of all. Here are the reasons that prove that gold loan is the best financial solution when you are in need:
1. Easy Application:
The procedure of loan application is straightforward and easy for a gold loan. You will not need to worry about the lengthy documentation process, with a gold loan, it is simple. All you should do is submit the standard documentation that your financial provider asks. The documents that you will need to submit are any ID proof, Address proof, Passport size photograph and your gold loan application. With that, you can submit your gold loan application easily.
2. Quick Disbursal:
When compared to other loan types, the gold loan has a lower disbursal time. When you apply for a gold loan with all the needed proofs, application form and gold, then your financial provider will provide you with the gold loan within hours. Once you pledge your gold, they will access the purity of your gold.
Upon accessing your gold ornament purity, they will decide upon the loan amount that you can get. Upon RBI guidelines, the LTV for a gold loan should be between 55 – 90%, and that changes depending upon the financial provider’s preference. Once the loan value calculation is over, your loan amount will get disbursed to your bank account directly.
3. Available for Lower Credit Score:
Even when you are a person with a lower credit score, you don’t need to worry about getting a gold loan. Unlike other loans, people with a lower credit score are also eligible for a gold loan. Gold loan is a safe loan where the gold that you pledge will act as collateral, so credit score is not needed. Also, getting a gold loan and repaying it on time without any defaults can positively improve your credit score. Improving your credit score now can assist you with your future financial processes.
4. Higher Loan Amount:
When you require a higher loan amount, and you are not eligible for that much amount in other loans, then gold is an excellent option for you. With a gold loan, when you pledge the equivalent amount of gold, you can get up to Rs.1 crore of loan. The extreme loan amount that you can get for the pledged gold will vary depending upon the prevailing gold rate in the market.
5. Flexible Usage:
When compared to a loan like personal or business loans, a gold loan doesn’t have restrictions. With a business loan, you can only use it for business purposes. Also, a personal loan will need you to provide the lenders with an insight on how you are going to use the money. But that is not a need with a gold loan, and there are no restrictions on how you are going to use the gold loan amount.
6. Reasonable Interest Rate:
As gold loans are secured loans, the interest rate for these loans is very reasonable. When compared to other unsecured loans, gold loans come with a significantly lower interest rate. The gold loan interest rates in the country range from 6 to 16% and it varies for each financial provider. When you analyse well you can choose the best gold loan option with a reasonable interest rate.
7. Flexible Repayment Options:
One of the biggest reasons why people consider getting a gold loan is because of its flexible repayment options. Gold loan offers various repayment options that will help you repay the loan without any financial stress. Some of the standard repayment options are paying monthly EMIs, which is a combination of the loan amount and the interest rate – common type.
Another option is you will pay only the interest rate as EMIs during the loan tenure, and you will pay the loan amount at the tenure end. Also, there is a unique method, where the interest rate and the loan amount will be partially twice or thrice between the loan tenure as per your financial stature.
8. Keeping Your Gold Secured:
You don’t need to be concerned about the gold that you pledge as collateral for the loan – it will be safe with the finance provider. But always make sure to check the safety standards of your financial provider and trustworthiness before choosing to get a gold loan. When you repay the loan without any defaults, you will get your gold without issues.
9. Extended Repayment Tenure:
With a gold loan, even when you are in trouble with repaying your gold loan, you can extend the tenure. Sometimes we will not know the financial problems that may arise, so you can talk to your financial provider about extending the repayment tenure.
10. No to Minimal Additional Charges:
When compared to other loan types, gold loans come with no processing fee. Also, only a few financial providers ask for additional charges which will be significantly less than other loan types.
With the above reasons, you can now understand why a gold loan is the best option for your financial needs. But always make sure to do thorough research on all the financial providers and choose the loan type that best suits you to get benefited from it.