Financial emergencies can come unannounced and often require quick solutions. In such a scenario, a gold loan becomes a unique financial product that offers funds against high-value gold items. Moreover, the easy accessibility of this financial product makes it a feasible option to fulfil any monetary exigency.
Although there are various financing options available in the market, individuals are mostly inclined towards gold loans due to their unrestricted usage, easy accessibility and faster processing.
Following is an illustration of why choosing a gold loan is beneficial in terms of quality and growth.
Why Choose a Gold Loan?
A gold loan is considered an ideal financing option to meet varied short-term requirements. However, due to the economic downturn in the past two years, most individuals are mortgaging their household gold assets to meet necessary expenditures. As a result, the outstanding gold loan touched a mark of Rs. 33,303 during 2020, significantly affecting other loan segments.
One of the primary reasons for this rise is the loss of income reluctance of financial institutions to extend other loans, enabling individuals to pledge their gold articles to raise funds against it. As already stated, it is a secured credit form that comes with an affordable interest rate. This is because individuals are pledging their high-value gold items, and the lending risk is comparatively lower. Due to a lower interest rate, the repayment amount is also affordable.
Moreover, unlike that in most financial products, the CIBIL score does not hold significance in this type of loan segment. Hence, borrowers with minimal CIBIL score or no credit history can apply for the credit.
What are the Benefits Offered by Gold Loans?
As already stated, financial emergencies require instant solutions, and a gold loan can offer that due to its easy accessibility. If you are wondering whether you should choose a loan against gold over other types of credit available in the market today, here are some of the benefits offered by this credit:
Considerable credit value
The availability of a sizeable gold loan makes it an ideal financing option for borrowers. Additionally, the flexibility of fund usage makes it a more preferred option for high-end expenses such as marriage, wedding expenses, medical expenses etc. Ideally, the market value of the collateral is the primary factor considered by the lender to decide the loan amount to be approved.
According to RBI guidelines, the LTV ratio of loans against gold is fixed at 75%, which means individuals can get a loan amount of up to 75% depending on the market value of the pledged gold. Alternatively, individuals can know the eligible amount by themselves by using a gold loan calculator, which will allow borrowers to determine the exact amount they are eligible to avail.
Affordable interest rates
Since it is a secured loan variant, lenders often levy a minimum gold loan interest rate. Therefore, an applicant successfully meeting the eligibility parameters and possessing the purest form of gold articles can ensure affordable interest rates against their loan. This further reduces the burden of monthly repayments and allows borrowers to repay with ease. Therefore, with proper planning, individuals can ensure lucrative savings from the overall process. However, one must know that the interest rate entirely relies on the lending institution, and thus applicants must compare the offerings of lenders before making an informed decision.
Flexible repayment option
Among other features, one of the unique features of a gold loan lies in the availability of multiple repayment options. Borrowers have the flexibility to choose from the repayment option depending on their financial capacity. Individuals are free to follow the traditional method of paying EMIs, including both principal and interest components. One can also choose to pay only the interest amount at the beginning of the tenor and repay the principal sum later. Furthermore, if one decides to pay interest amount quarterly or monthly, they can do that freely and pay the principal at the tenor’s end.
Faster processing and approval
The secured nature of gold loans accelerates the loan processing and disbursal faster. Usually, eligible applicants with authentic documents and pure gold items can obtain advances within a minimum time. Moreover, certain lenders disburse the loan amount within one day to the borrower’s account. This makes a gold loan a lucrative financing option to address financial emergencies.
Part-release facility
Availing a gold loan from leading financiers like Bajaj Finserv allows borrowers to enjoy a part-release facility, which means individuals can withdraw a certain portion of gold items by paying a substantial amount that should be equivalent to the amount of released gold.
Therefore, to obtain the benefits mentioned above, individuals need to know the procedure of how to get a gold loan and apply accordingly to avoid any hassles in the long run.
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