One common misconception about gold loans is the fear of losing the pledged gold. Many believe that if they default on the loan, their gold will be instantly seized and sold. However, reputable lenders follow a strict process before taking such action. Typically, borrowers are given multiple reminders and ample time to repay the outstanding amount. Only after all attempts to recover the loan have failed do lenders initiate the process of auctioning the gold. Even then, the entire process is conducted transparently, and the borrower is informed at each stage. Thus, the fear of losing gold is largely unfounded. Proper understanding of the loan agreement and regular communication with the lender can alleviate this fear, ensuring that borrowers can comfortably repay the loan without worrying about losing their precious gold assets.
Myth 2 - Only jewellers provide gold loans
There is a prevalent myth that only jewellers offer gold loans. While jewellers do provide this service, they are not the only entities capable of doing so. Banks, non-banking financial companies (NBFCs), and even some microfinance institutions in India also offer gold loans. These institutions typically provide better interest rates, more transparent processes, and higher loan amounts compared to local jewellers. Additionally, banks and NBFCs are regulated by the Reserve Bank of India (RBI), ensuring that the loan terms are fair and in the borrower’s favour. By choosing a reputed bank or NBFC, borrowers can benefit from secure transactions and better customer service. Therefore, it's a misconception that gold loans are the domain of jewellers alone. Borrowers should explore different options and compare offers from various institutions before making a decision.
Myth 3 - Old gold won't qualify for gold loans
Another widespread myth is that old gold cannot be used to secure a gold loan. In reality, the age of the gold does not affect its eligibility for a
loan against gold. Lenders are primarily concerned with the purity and weight of the gold, not its age. As long as the gold meets the required purity standards, it can be used as collateral regardless of its age or the condition of the jewellery. This means that even heirloom pieces or gold that has been in the family for generations can be pledged to obtain a loan. Lenders typically conduct a thorough evaluation of the gold to determine its value and the amount that can be sanctioned. Therefore, old gold is just as valuable in securing a gold loan as new gold, dispelling this common myth.
Myth 4 - Tiresome paper trails in the gold loan process
Many potential borrowers hesitate to apply for a gold loan due to the misconception that the process involves tiresome paper trails. However, the reality is quite different. Gold loans are known for their minimal documentation requirements, making the process quick and hassle-free. Most lenders only require basic identification and address proof, along with a few other documents depending on their policies. The entire process, from application to disbursement, is streamlined to ensure that borrowers receive their funds as quickly as possible. Some lenders even offer digital gold loans, where the documentation can be submitted online, further simplifying the process. This ease of documentation makes gold loans a convenient option for those in need of immediate funds, challenging the myth of a cumbersome paper trail.
Myth 5 -High gold interest rates
A common myth surrounding gold loans is that they come with exorbitantly high interest rates. While it's true that interest rates can vary, they are generally lower than those for unsecured loans like personal loans. This is because gold loans are secured by the borrower’s gold, reducing the lender’s risk and allowing them to offer more competitive rates. Additionally, the interest rate on a gold loan is often influenced by factors such as the loan amount, the tenure, and the lender’s policies. Many financial institutions also offer flexible repayment options, making it easier for borrowers to manage their finances. By shopping around and comparing offers from different lenders, borrowers can find gold loans with favourable interest rates that suit their financial situation.
Myth 6 - Gold loan processing is time-consuming
There is a misconception that the gold loan processing time is lengthy and cumbersome. In reality, gold loans are among the quickest financial products to process. Most banks and NBFCs have streamlined their processes to ensure that loan disbursement occurs within a few hours of application. The evaluation of gold, along with minimal documentation, is carried out swiftly, making it possible for borrowers to receive funds almost immediately. This quick turnaround time is one of the primary reasons gold loans are preferred during financial emergencies. Some lenders even offer doorstep services, where the gold is appraised, and the loan is processed at the borrower’s location, further expediting the process. Thus, the myth of time-consuming gold loan processing is largely unfounded.
Myth 7 - Gold loans require a good credit score
Another widespread myth is that a good credit score is necessary to avail a gold loan. Unlike other types of loans, gold loans are secured by the borrower’s gold, which serves as collateral. This significantly reduces the lender’s risk, making the borrower’s credit score less relevant in the approval process. Most lenders do not consider the borrower’s credit history as a primary factor in sanctioning a gold loan. This makes gold loans an accessible option for individuals with a low or no credit score, offering them a means to secure funds when they might struggle to get other forms of credit. The focus is primarily on the value and purity of the gold being pledged, rather than the borrower’s financial past, dispelling the myth that a good credit score is essential for gold loans.
Myth 8 - Gold loans are only for rural areas or small-scale borrowers
A common myth is that gold loans are only suitable for rural areas or small-scale borrowers. While gold loans are indeed popular in rural regions, where they provide essential financial support, they are not limited to these areas. Gold loans have gained traction among urban borrowers, including business owners, salaried professionals, and even high-net-worth individuals, due to their convenience, quick processing, and flexible terms. The funds from a gold loan can be used for various purposes, such as expanding a business, covering medical expenses, or financing education. This versatility has made gold loans a popular choice across different demographics and regions in India. Therefore, the notion that gold loans are restricted to rural borrowers is a misconception, as they offer financial solutions to a wide range of people.
With Bajaj Finserv Gold Loan, you can get a gold loan of up to Rs. 2 crore against your loan against 18-22 carat gold jewellery.
