5 Reasons to Choose a Gold Loan for Your Financial Needs

Over the years, a gold loan has become a desirable credit instrument for most borrowers. Although there are various loan options available in the financial market that can fulfil any urgent requirements of borrowers, individuals are more inclined towards a gold loan due to its easy accessibility, shorter processing time and no end-use restriction.

As per the Reserve Bank of India, the gold loan category in India almost grew to 82% since 2020, while other loan segments faced a downfall. Apart from interest rates, other reasons make gold loans an ideal option for borrowers.

Why is a Gold Loan Important?

The price of gold is touching heights as many wonder how to use their physical gold. Many consumers who possess gold items in reserve consider a gold loan an effective option to meet a wide range of credit requirements. Since the rise of a pandemic, gold companies and financial institutions have reported increasing demand for gold loans.

Since a loan on gold is a secured financing option, interest rates are comparatively lower than other unsecured loans. However, one must note that RBI has capped the LTV ratio of a gold loan at 75%, which means that consumers can obtain a loan amount of up to 75% based on the market price of gold. Usually, unsecured advances consume substantial time for approval and sanctioning, while gold loans are convenient options during financial emergencies.

Reasons to Choose a Gold Loan

Usually, a gold loan is considered a unique financing option for meeting short-term requirements. Individuals need to pledge their unutilised gold as collateral and obtain funds against it. Besides, a loan against gold comes with multiple inherent benefits that make it an ideal financing option for borrowers. One can several terms associated with the loan by using a gold loan EMI calculator and determining the EMIs beforehand to manage finances efficiently.

Here, let’s discuss five reasons that make a gold loan an ideal option for borrowers to take care of their financial requirements:

Substantial amount at low credit score

A gold loan is one of the few credit instruments to obtain a considerable amount with a low credit score. The price of pledged gold significantly reduces the risk factors associated with the loaning procedure. Hence, financial institutions offer substantial loans to customers with low credit scores. In addition, the amount that can be acquired through a gold loan is comparatively higher than other mortgage loans as the market price of gold is greater than other assets.

Besides, credit score does not hold any significance while deciding gold loan interest rate. As already mentioned, since a loan against gold is a secured credit option, interest rates are comparatively lower than other financing options. Individuals are not required to negotiate with the lender for competitive rates.

Extended repayment tenor

The gold loan comes with an extended tenor and is probably one of the biggest advantages of this credit facility. It further allows borrowers to reduce their repayment burden and repay their gold loan EMI easily.

Flexible repayment option

One of the biggest highlights of a gold loan is its repayment option. Individuals are not required to pay any fixed monthly instalments and can repay the entire loan in a small amount based on their financial affordability. Moreover, availing of a loan against gold from Bajaj Finserv will allow borrowers to enjoy flexible repayment options. Individuals can pay the interest component quarterly or monthly and repay the principal later. Also, one can choose to repay the entire interest amount at the beginning of the tenor and repay the principal later.

Faster processing

This is one of the advantages of a gold loan, as the application process is simple and straightforward. In addition, with minimal documentation and flexible eligibility, the loan approval and disbursal take minimum turnaround time.

Safeguarding of assets

With a loan against gold, individuals are putting their assets as mortgage and are kept safely at the vault or lockers of the financial institutions. Hence, one can take care of their financial requirements and ensure that their assets are safe and secure.

Key Features of a Gold Loan

Here are some of the highlighted features of gold loan:

Lower borrowing cost

Due to the secured nature of a gold loan, the borrowing cost is comparatively lower than other unsecured loans.

Quick processing

Not only is the process of gold loan disbursal simpler, but also quicker. As a result, individuals can obtain instant funds and meet their financial emergencies.

Minimal documentation

Individuals do not have to go through extensive documentation to avail a gold loan. Submitting address proof and KYC documents for gold loan will allow borrowers to avail funds as early as possible.

Reasonable interest rate

Affordable interest rates on a gold loan are another important reason for choosing this credit facility. Since the value of gold increases with time, the lending risk is comparatively low for this credit option, and lenders offer competitive interest rates to the eligible applicants.

Therefore, these are the top five reasons to choose a gold loan to fulfil financial requirements. Moreover, unlike secured advances, one can partly release their mortgaged gold items by paying a substantial amount equivalent to the market price of the pledged gold before the end of the tenor.