Individuals can liquidate gold ornaments or jewellery during a financial crisis and get a high loan amount from a lending institution. Borrowers can utilise the funds for various purposes without any interference from the lending partner. Read on to know about the benefits of opting for a gold loan in India.
A brief overview of gold loans
The best gold loan is a secured credit instrument that helps candidates to obtain a lump-sum loan amount based on the current market value of gold. This credit instrument has several beneficial features, such as low interest rates, easy-to-meet eligibility parameters and flexible repayment options. These features have made gold loans quite popular among borrowers in India.
In most cases, borrowers will be able to obtain a certain percentage of the current market value of the pledged gold, which is also known as LTV or loan to value. Several leading financial institutions in our country offer 75% of the pledged gold’s market value. Due to this reason, gold loans are a more viable option than unsecured credit instruments.
Features and benefits of a gold loan in India
Intending borrowers should know the beneficial aspects of a loan against gold before applying for credit. Here are the benefits that make this credit instrument popular among intending borrowers:
● Multiple repayment options
Besides, affordable monthly instalments, gold loan schemes come with multiple repayment options. Leading financial institutions extend lucrative repayment options, such as:
- Candidates have the option of paying the complete interest amount at the beginning of the tenure and repaying the rest principal amount later.
- Borrowers can also make monthly or quarterly interest payments and the principal amount at the end of the loan tenure.
- Lastly, individuals can choose to make repayments through the traditional EMI system.
● Prompt loan approvals and disbursals
Being a secured credit facility, financial institutions approve and disburse a gold loan within a minimum turnaround time. Furthermore, financial institutions transfer the loan amount to a borrower’s bank account.
● Competitive interest rates
Due to its secured nature, financial institutions charge low interest rates on gold loans. This is because in case a borrower fails to repay the loan amount, the lending institution can auction off the gold and recover the outstanding dues. Further, borrowers can also negotiate the interest rates by providing additional collateral.
● Simple eligibility parameters
Unlike unsecured credit instruments where a financial institution set strict eligibility parameters to secure their money, gold loans have quite lenient eligibility parameters. Any candidate, be it a self-employed, salaried, farmer or merchant can opt for this credit facility.
Moreover, as lenders do not conduct strict credit score assessments, gold loans turn out to be one of the best financial options for those with a poor credit scores.
● Hassle-free paperwork
A lender usually asks for several supporting documents for verification purposes before sanctioning a loan. However, such is not the case with gold loans. While applying for a gold loan, a candidate will have to produce only the KYC documents, such as identity, address and income proof.
● Robust security
It is an obvious fact that a borrower will be worried while trusting a lender with their gold articles. However, since the gold loan scheme ensure strong security, borrowers can leave the worry to the lenders.
In this credit facility, financial institutions take the highest precautions for safety and security and safeguard gold articles in a deposit locker or vault in front of a top-notch security camera. The gold treasures are kept safe and protected due to the robust infrastructure a lender maintains.
● No restriction on credit usage
A borrower can use a loan against gold without any restriction or obligation. They can fund any kind of expense as per their necessities without any interference from the lending institution. The obtained loan amount can be used to fund any kind of expenses, such as paying education fees, renovating an old property, and more.
To sum it up, people can opt for a gold loan in India to obtain a considerable amount of money by pledging high-quality gold assets. However, irrespective of the type of repayment one chooses, he or she must ensure to make the repayments in a disciplined manner. This will ensure that their gold assets remain safe throughout the repayment tenure and they enjoy a hassle-free borrowing experience.