What are the features and benefits of taking a gold loan?
After the massive economic downfall over the last two years, the loan sectors generally remain dimmed, except the gold loan category. This loan segment has reported a y-o-y growth of 77.4% to reach Rs. 62,412 crore in June 2021.
Unlike other financial products, gold loans have been a valuable option during the financial crisis. Moreover, gold loan benefits such as substantial liquidity, attractive interest rates, quicker processing time, make it an ideal fit to meet an array of financial requirements.
Knowing about different features of gold loan benefits can allow borrowers to comprehend what they should seek before settling for a lender. Read on to know about them.
An overview of gold loan features and benefits
Gold always holds a significant value and acts as a source of prospective capital appreciation for the future. Individuals can utilise their idle gold and raise funds against it when facing financial emergencies. In addition, many financial institutions extend gold loans for borrowers allowing them to fulfil personal and professional requirements.
Understanding gold loan benefits, features and the differences between several gold loan providers and their offerings can help borrowers reap its benefits in every way. Here are some of the features and benefits associated with the credit option:
As already mentioned, gold loan is secured variants where borrowers pledge their high-value gold articles as collateral with the lender and obtain substantial funds against it. Usually, with unsecured loans, lenders' risk factor is high since the credit is not backed with any asset. However, by mortgaging an asset, lenders can secure the asset. This assurance allows lenders to extend credit without hesitation, and borrowers can expect early loan approval.
Sizeable loan quantum
In the case of gold loans, the approved amount depends on the purity and weight of pledged gold articles. Therefore, one can obtain a substantial amount by submitting an equal amount of gold items as collateral. However, one must remember that the RBI has capped the LTV ratio of gold at 75%, but the sanctioned amount depends on the lender.
For instance, if an individual submits gold articles worth Rs. 1 lakh, he/she can obtain a loan amount of approximately Rs. 75, 000.
In this regard, borrowers can use a gold loan calculator to estimate how much loan amount they can avail. Individuals just need to enter the expected tenor, number of gold articles, weight of the jewellery and carat details. This online calculator will display the estimated eligible amount based on the entered details.
Flexible repayment options
Since such advances are secured variants, lenders offer flexible repayment tenor and loan terms for eligible borrowers. This favours the borrowers as it allows them to choose a suitable repayment option based on their financial standing. Leading financiers like Bajaj Finserv provide the following repayment option:
- One can choose the traditional EMI option
- One can choose to pay the entire interest amount at the beginning of the tenor and the principal sum later.
- Individuals can choose to pay interest component periodically and principal amount at the tenor’s end.
With the availability of multiple repayment options and a flexible gold loan tenor, it is convenient for borrowers to repay with ease.
Competitive interest rate
Being secured in nature, lenders usually extend low interest gold loan. Moreover, compared to other financial products, this loan product comes with an affordable interest rate that reduces the overall borrowing cost. Therefore, it is favourable for borrowers to meet their varied expenses without facing any repayment burden.
Easy eligibility and documentation
Among multiple gold loan benefits and features, one of them is the lenient eligibility parameters, where individuals above the age of 21 years can apply for this loan. One point that needs mentioning is that lenders do not emphasise credit scores for extending credit. Thus, borrowers with poor or no credit score and repayment history can obtain a loan against gold.
Moreover, the documentation process of gold loans is not extensive and completely hassle-free. Individuals are only required to submit gold loan documents to avail of the credit. Resultantly, this process consumes less time and is helpful during financial emergencies.
Apart from these, one of the notable gold loan benefits offered by Bajaj Finserv is the part-release facility where individuals can release a certain portion of gold by paying an equivalent amount of money.
Thus, this credit option allows borrowers to fulfil their miscellaneous financial expenses. Besides the aforementioned gold loan benefits, individuals can pre-pay and foreclose their loan accounts without paying extra charges with certain lenders.
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