Investing in gold is something very auspicious for Indians. They will feel it as an asset close to their heart as they can use in times of need. For people who are making revenue through farming and other informal segments have more chances of opting for gold loans at the time of their need.
Gold loan is a loan in which you will have to submit your gold ornaments as collateral and get funds against it. You will have to return the loan amount along with a certain interest rate applicable to it. Nowadays, as gold prices are increasing like never before, in the 2020 budget, the import duty on gold has increased from 10% to 12.5%, which is unexpected.
At times of financial needs like education, wedding or any other reasons you can opt for a gold loan. While you get your funds for the gold you submit, your gold will be kept safe until you repay the loan. Both banks and NBFCs in India offer gold loan to their customers at the time of their needs.
Here are certain important reasons why people opt for a gold loan:
Pledge Your Gold For A Lump Sum:
With a loan till Rs.10 lakh, you can get funds to fulfil all your requirements whether it’s for your personal or professional needs. As you are submitting your gold ornaments as collateral for your loan, it will be easy for processing and disbursing cash. There are online carat meters which will help you in checking the amount of gold loan you are eligible. Depending upon the gold, you give as collateral.
Easy To Avail:
The most important benefit of the gold loan is that the processing time for gold loan is meagre and time-consuming than that of other loans. As your loan is secured with physical gold, the financial provider will be happy about lending you the loan easily. It will be safe for the financial provider to give you a loan as there won’t be a problem for them regarding your repayment.
Until you repay the loan, the physical gold which you have submitted as collateral will be with the finance provider. Only when you repay the loan your gold will be given back to you. If you default to pay back the loan, then the financial provider has the right to seize your gold ornaments.
Flexible tenure:
When you opt for a gold loan, you will get to choose a flexible tenure for repaying your gold loan. The gold loan tenure ranges from days to years which you can choose depending upon your requirements and financial stability. You can choose a tenure which would not stress you financially with its huge repayment.
Flexible Repayment Options:
You will get to choose a wide range of options when it comes to repayment of your gold loan. There are options like
- You can pay your interest on a monthly or quarterly basis and the loan amount at the tenure end
- You can pay both the interest and loan amount in EMIs
- You can pay both the interest and the principal amount at the tenure end
You can opt for the option which best suits your financial stability and which doesn’t make it hard on your regular expenses.
Part Release and Top-Up Facility:
There are options like part release and top-up facility when it comes to a gold loan. With part release option you can get a part of your gold which you submitted as collateral when you had repaid the loan amount which covers a part of gold. Whereas with the top-up facility you can get additional loan amount when you are in current loan tenure, on topping up your current gold loan.
Safety On The Gold You Have Pledged:
You don’t have to worry about the gold which you have submitted as collateral. The financial provider whom you choose to get your gold loan from will be fully responsible for your gold ornaments. Until you repay the loan, the gold you have pledged as collateral will be safe and secured.
Lower Interest Rate:
When compared to other loans, the gold loan has a very low-interest rate. The interest rate is another important factor which makes people opt for the gold loan than other loans. Usually, the gold loan interest rate ranges between 5% to 20% depending upon the tenure you choose and the purity of the gold which you submit as collateral. As it has a very low-interest rate compared to that of other loans, Indians feel this to be the easiest loan they can opt for.
Zero Processing Fees:
As gold loans are given with physical gold as collateral, there is no processing fee for it. Most of the banks and NBFCs lets you avail for a gold loan with zero or very minimal processing fee when compared to that of other loans.
No Credit Score:
Unlike other loans, gold loans don’t look for your credit score. Most of the banks and NBFCs will ask for a credit score when you opt for any loan types. But as it is a secured loan gold loan don’t need your credit score for approving and processing your loan. As the physical gold which you submit to the financial provider will be with them till tenure end, they will let you get a loan even with a low credit score.
A credit score is the ranking which will depend upon your existing loans and how you have repaid it. When you have any default in your payments, then your credit score will be bad. A credit score which is 750 and above, is considered a good credit score.
Minimal Documentation:
Compared to other loans, the gold loan requires very minimal documentation. Only address proof, ID proof and photographs are all that is needed when you want a gold loan. There won’t be much of the paperwork required for your gold loan, so it is easy to avail.