April 15, 2024

Across the globe, Indians are known for their excessive love for gold. India is the biggest gold importer. Gold carries considerable value and is even a source of capital appreciation in future. But not many are aware that gold may even be utilized to finance any emergency cash needs like children’s education, medical expenditures, down payment for vehicle buys, business set up and annual holidays with the family.

When you witness a situation that needs immediate money, you can make utilization of gold that may be lying idle in bank lockers. Today, many NBFCs (non-banking financial companies) and banks like the Indian bank gold loan provide gold loans. Such loans come in handy and may be sourced instantly when you require instant money. You can avail gold loan, which you may possess in any form, such as gold coins, jewellery, and gold bars.

What’s a gold loan?

This is a secured form of loan that private or public banks and various other financial institutions provide against gold ornaments and jewellery as security or collateral. Also, the gold loan interest rate is low owing to its secured nature. You can usually get a gold loan for as high as Rs 1 crore. You require submitting KYC documents when applying for a gold loan. Zero income proof is needed owing to its secured nature.

Gold loan eligibility proceeds are based on various parameters like gold loan interest rate, repayment tenure, carat rating, weight and number of jewellery and ornaments. At the same time, it is a highly convenient loan option that can be utilized for several purposes. Here in this article, discussed are a few of the benefits offered by gold loans and why individuals must make the most out of them.

What are the advantages provided by gold loans?

A few of the major advantages of a gold loan are given below –

Instant processing

As gold loans require physical gold in the form of security or collateral, lenders and other financial lenders easily offer such loans. For financial institutions, a gold loan is a safer instrument as they can easily sell the gold assets if you default on the loan EMI. Hence, financial institutions tend to process such loans in a matter of hours. This leads to lesser processing time and, thus, added convenience for you.

Pay interest-only choice

Gold loans come with features that are unique, like it permits you to just make payment of the interest constituent while making payment of the loan. The principal constituent can be repaid towards the end of the repayment tenure or in the course of closure formalities of the loan.

Comparatively lower rate of interest

As the gold loan is secured in nature, banks levy a lower rate of interest than unsecured loan options like personal loans. The gold loan interest rate range anywhere between 7 per cent p.a. and 26 per cent p.a. On the contrary, personal loan rates usually range between 10 per cent p.a. and 24 per cent p.a. If you are a borrower who can provide collateral or security, then a gold loan may come across perfect option as it comes with a lower interest rate. However, if you cannot provide any security or collateral, then a personal loan may be the best choice for you.

No processing charges

Many NBFCs and banks do not levy any processing charges as gold loans are offered instantly, with gold being held as security or collateral by the financial institution.

Minimal foreclosure fees

Few lenders and banks either do not levy or have minimal prepayment fees of 1 per cent on gold loans.

Zero income proof to be provided

For most loans against gold applications, lenders do not ask for income proof from you as the loan is secured against gold pledged by you.

Zero impact of having a poor credit history

For most loans, financial institutions grant loan proceeds based on your repayment potential and your credit history. However, it is not the scenario with a loan against gold. As gold is utilized as security or collateral, lenders or financial institutions are assured regarding your principal constituent repayment and thus do not depend on your credit history before approving your loan.

Security of the physical gold

The responsibility to safely maintain physical gold is a massive one for all. You often keep it in your bank’s vault, and thus, you do not require worrying about this. Once you repay the gold loan in full, the gold that you pledged is returned by the financial institution to you. 

Ending note

A gold loan is simple to get, but you must ensure that you repay the loan by the due date, failing which gold might be surrendered to the financial institution. You can get a gold loan from the lender of your choice to meet your immediate financial emergencies because the disbursement procedure is instant and simple.

Frequently asked questions (FAQs)

What are the advantages of availing of a gold loan?

Few of the key advantages of availing of the gold loan are –

∙       Lower rate of interest and minimal processing charges

∙       Minimal documentation

∙       Flexible loan repayment tenures

∙       No or low loan foreclosure fees

∙       High loan to value (LTV) ratio

∙       Distinct loan repayment choices

Is availing gold loan completely safe?

Gold loan is looked upon as a safe instrument. Physical gold might not generate high value, and however, with a gold loan, you can pledge this gold to avail the cash of your requirement to meet your financial exigencies. Once you repay all the EMIs, the pledged gold is returned to you.

Which financial institution is best for availing of a gold loan?

To get the lowest gold loan interest rate, you can approach public sector banks like Indian Bank gold, State Bank of India, Bank of India, etc.

Is a gold loan a better choice than a personal loan?

Yes, a gold loan is a better choice than a personal loan if you can repay your loan EMIs in a shorter duration. It is because the interest rate on a gold loan is lower than on a personal loan. On the contrary, a personal loan is considered by many of you because of its higher repayment tenure, which may go up to 6 years and higher loan proceeds. Based on your financial needs and repayment capacity, you can select between the 2 options.

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