Due to India’s significant gold imports, many individuals own gold ornaments. To meet their immediate financial needs, people are utilising their idle gold jewellery to obtain a loan against it. In times of crisis, gold loans have proven to be a valuable financing option compared to others. There are numerous advantages that applicants can obtain from this type of loan against gold, some of which are listed below.
Why Must You Take a Gold Loan?
Using your gold jewellery wisely can serve as a source of emergency funds for various purposes such as medical emergencies, education expenses for your children, business expansion, down payments for a car, or family vacations. Gold has appreciated significantly over time and is considered a valuable asset. In times of financial need, your gold can be utilised through a gold loan, a convenient and fast way to obtain cash without complications.
Security Of Physical Gold
A significant advantage of taking a gold loan is the assurance provided by the physical gold used as collateral by the borrower. The lender ensures the safekeeping of the gold in secure vaults and takes measures to safeguard it with insurance coverage in the event of theft. Upon loan repayment, the lender returns the pledged gold to the borrower.
Gold loans are readily available from banks and other lending institutions due to the presence of physical gold as collateral. As lending against gold is considered a secure option, banks can sell the gold to recover the loan amount in case of borrower default. Consequently, these loans are usually processed quickly, with banks disbursing funds within a few hours. This translates to reduced processing time, adding to the convenience of borrowers.
Another significant advantage is the minimal documentation required by lenders. The process is based on a Know Your Customer (KYC) approach that ensures hassle-free submission of only essential documents. To obtain a gold loan, you only need to submit proof of identity, proof of address, and a loan application. There is no need to provide income proof or credit score details as part of the documentation process.
Comparatively Lower Interest Rate
Due to the secured nature of gold loans, banks offer lower interest rates than unsecured loans like personal loans. The interest rates for gold loans typically range between 13 to 14%, while personal loans may have interest rates of around 15%. The bank may further reduce the interest rates on gold loans for borrowers who can offer additional collateral, such as gold. Use the gold loan calculator to determine the amount.
A credit history is not a prerequisite for obtaining a gold loan. In contrast, when applying for a personal loan, a poor credit history may lead to loan rejection by the bank. With gold loans, credit history is irrelevant since gold is pledged as collateral, making it a much more advantageous option.
Another benefit of a gold loan is that it does not necessitate income proof. Unlike auto loans, home loans, and personal loans, which require applicants to demonstrate a source of income, it is nearly impossible to obtain any other loan without providing income-related documents like bank statements or salary proofs.
Gold loans are a reliable source of financial assistance when you require capital urgently. It is crucial to understand these products to meet future financial needs and remain up to date on the newest versions that provide improved security and lower the overall interest load on loans. Finally, using an interest calculator to determine the lowest gold loan interest rate is wise.