A gold loan is one of the best borrowing options today. Do you know why, because it is widely accessible to everyone, and all you have to do pledge your self-owned gold assets to a bank or NBFC, and get up to Rs. 1 crore as funds. You can use the funds to meet any monetary need. The tenure of the loan is short, specifically between 1 year and 2 years. So, if you have gold jewellery on you and in need of urgent funds, then a loan against gold is one of the ideal alternatives.
Below, we have explored the benefits of taking the loan:
Make Use of Idle Lying Assets:
With a loan against gold, you will get to utilize idle lying gold in the bank locker or at home. You can use your self-owned jewellery or bank-purchased coin to pledge to bank and obtain funds. The gold must be at least 18 carat to 22 carat. Gold plated ornaments, biscuits, wires, and certain forms of gold are not accepted as collateral.
So, make sure to check on the acceptable forms of gold before approaching a financial institution for the funds. Taking a loan on gold helps you keep away from liquidating the asset for ready cash, and keep the gold intact without a loss.
While other type of loans demands bank statements, employment letter, credit report, etc; a gold loan comes with the facility of minimal documentation. The only proof required is PAN card and KYC documents, such as identity proof and residence proof. You need to fill the loan application form and sign it, and include your recent passport-sized photograph.
Safety for Gold:
Are you worried about the security of pledged gold assets? Then leave your worries aside, because the financial institution providing the funds against the asset will also make sure the gold jewellery or coin remains safe and secured until you repay the loan in complete, after which you will get the gold back in a few days. Most banks offer a three-layered security to the gold so that no possibility of theft or misuse of gold results.
Flexible Loan Amount:
The borrowing amount on a loan against gold is between Rs. 50,000 and Rs. 1 crore. A few financial institutions may offer up to Rs. 5 crore or more. There are special schemes for a quantum of finance lower than Rs. 50,000 as well for agriculturists and rural areas. Under such schemes, the loan amount can start from Rs. 10,000.
As the funding is backed by physical gold, the processing time is less. After submitting the loan application form, the bankers get the gold asset evaluated to determine the loan amount, tenure, and interest rate applicable. Thus, the lending decision can be taken in as less as 45 minutes after processing of the loan application, and you can get the funds the same-day of the loan approval.
Anyone Can Apply:
The loan is available for every Indian resident citizen who is over 18 years of age. This holds true even for homemakers and those not currently employed. Those with stable income can also apply for the loan. Being a secured loan, financial institutions are prepared to lend an amount even if the applicant does not have an income source yet.
No Income Proof Required:
Even if you have a job or a business, when applying for a loan against gold, you do not have to submit income proof documents. This is because; the banks retain a fair margin before disbursing an amount. The eligible loan amount is up to 75% of the gold’s market value. Thus, even if you default, the lender can recover dues by selling off the gold.
Low Interest Rates:
A loan against gold applies a lower interest rate compared to that on an unsecured loan, such as payday loan or a personal loan. The rates begin at 10.99%, which is competitive in the market, making the borrowing option affordable for many people.
Different Repayment Options:
Other than the standard repayment scheme via monthly instalments, wherein you have to pay a component of both the principal borrower and interest applied, you can avail another repayment option as well – Bullet Repayment Scheme. Here, through the entire tenure, every month, you have to pay a part of interest component till end of tenure. After this, you have to repay the principal borrowed in lump sum.
Online Application and Payment:
There are a few financial institutions that have a special app to obtain a gold loan, and keep track of the loan status. You can download the app to apply for the funds and request for gold valuation. You are entitled for doorstep service in case the loan amount requirement is high. On the app you can keep a track of the loan application status and keep a check on the amount of credit remaining from the loan. The application even accepts direct EMI payment towards the loan.
Relaxed Criteria for Credit Score:
Personal loans, business loans, or any other secured lending such as a home loan or a loan against property, require you to have a good credit score. But in case of a loan against gold, you can avail funds even with CIBIL 600+ than 750+.
There are special loan against gold schemes for agriculturists. Here, the funds have to be used for farming or agriculture purpose and the borrower has to provide a proof of land holding to obtain the funds. The bank may keep a check on the end use of the funds. Similarly, women entrepreneurs are entitled for special gold loan schemes for business purposes. In both the cases, discounted rates by 1% to 2% on standard rates may apply.
No Hidden Costs:
There are a few charges that may apply on a gold loan, such as that for gold valuation charges, loan processing charges, etc. But all these costs are mentioned upfront in the loan agreement, thus, you must read the fine-print of the agreement before signing the same. All the terms and conditions, along with instance of penalties charged if any in case of a default or late payment will be mentioned in the loan agreement.
A gold loan helps you sail through any financial crisis, because it gets processed and disbursed within 24 hours or less. You can use the loan for any expense, unplanned or planned, and there is no question asked on the end purpose of the funds. It is easy to avail since these days almost every bank and NBFC offers this loan facility. Having a wide reach, a gold loan is accessible even in remote and rural areas.