- Date : 12/03/2023
- Read: 4 mins
Do you know that you can borrow against your gold holdings? Do you know that you can utilize your idle assets to your advantage? Read this article to learn more.
Gold loan in India is a popular form of personal finance, offering borrowers access to funds quickly and at competitive interest rates. Gold loans are especially attractive to borrowers because of the flexibility they offer and the numerous benefits they provide. In this article, we will discuss why borrowers prefer gold loans, highlighting the advantages that make it a choice for many. This article has the following sections:
- What is a gold loan?
- Why are gold loan gaining in popularity in India?
What is a gold loan?
A gold loan in India is a form of secured loan where the borrower pledges their gold jewellry or gold coins as collateral for a loan. Gold loans are popular among people who need quick access to money but have yet to have any other form of collateral. Gold loans are typically offered at lower interest rates than unsecured loans. The loan amount can be used to meet any urgent, non-planned need.
Why are gold loan gaining in popularity in India?
Gold loans are gaining in popularity in India because of the following reasons:
1. Fast Processing
By providing a physical asset as collateral for the loan, the chances of the loan defaulting are low, which results in a shorter creditworthiness evaluation time and facilitates faster processing. Customers only need to bring their gold to obtain the funds, making the process easy and uncomplicated.
2. Multiple repayment options
When seeking a gold loan, carefully reviewing and comprehending all available repayment alternatives is crucial. Financial institutions such as banks and NBFCs provide multiple repayment options for gold loan EMIs, such as Regular EMI payment, Paying interest as EMI and Principal at tenure end, Partial Payment, etc. After carefully examining all options, borrowers can choose the repayment alternative that best suits their repayment capacity.
3. Economical Interest Rate
Gold loans have interest rates lower than other loan options, making them a desirable choice for customers compared to personal loans. Interest rates generally range from 8.5-10 per cent annually in public sector banks. The interest rates are slightly higher in private-sector banks. (Note: Check with your lender about prevailing rates when taking a loan.)
4. Processing Fee
Processing fees on a gold loan are either negligible or completely absent.
5. Minimum foreclosure Charges
The foreclosure of a gold loan incurs minimal charges. While some lenders do not impose prepayment fees, others may charge 2% of the outstanding balance.
6. Eligibility Criteria for Gold Loan
Gold loans are accessible to individuals above 18, regardless of their credit score.
7. Minimum Documentation
Gold loans typically require fewer documents to be submitted to the lender. In addition, the credit requirements are more lenient since the borrower is providing a physical and valuable asset to the bank as collateral. As a result, the processing time is shortened, making it a more convenient and expedited way to acquire the necessary funds.
Also Read: Market Insights
8. CIBIL Score Check Not Required
Borrowers with a low credit score may have their loan applications denied by banks and NBFCs. Nonetheless, obtaining a gold loan does not require a favourable CIBIL score. The purity of the gold solely determines the amount disbursed for a gold loan. The mortgage of the gold items provides sufficient security for a bank or NBFC.
9. Productive Use of Idle Assets
Typically, borrowers pledge ornaments they do not frequently use to obtain a gold loan. It ensures that the unused assets are monetized without being sold.
10. Usage of Funds
Occasionally, individuals may require funds on short notice to cover unexpected expenses such as medical emergencies or family weddings. In such circumstances, gold loans can offer funding without constraints on how it is used. It contrasts home or car loans, which may only be used for specific purposes.
11. Loans of High-Value
Gold loans have no maximum limit on the amount that can be disbursed. As long as the borrower can provide the necessary gold collateral, banks/NBFCs will have no issue sanctioning the loan.
Also Read: About available investment options
Gold loans offer a mutually beneficial arrangement for both the borrower and lender. Borrowers can obtain funds at reasonable rates and use them without any limitations. The chances of the loan becoming non-performing are minimal due to the scarcity and appreciation of gold's value over time.
Gold loan in India is a popular form of personal finance, offering borrowers access to funds quickly and at competitive interest rates. Gold loans are especially attractive to borrowers because of the flexibility they offer and the numerous benefits they provide. In this article, we will discuss why borrowers prefer gold loans, highlighting the advantages that make it a choice for many. This article has the following sections:
- What is a gold loan?
- Why are gold loan gaining in popularity in India?
What is a gold loan?
A gold loan in India is a form of secured loan where the borrower pledges their gold jewellry or gold coins as collateral for a loan. Gold loans are popular among people who need quick access to money but have yet to have any other form of collateral. Gold loans are typically offered at lower interest rates than unsecured loans. The loan amount can be used to meet any urgent, non-planned need.
Why are gold loan gaining in popularity in India?
Gold loans are gaining in popularity in India because of the following reasons:
1. Fast Processing
By providing a physical asset as collateral for the loan, the chances of the loan defaulting are low, which results in a shorter creditworthiness evaluation time and facilitates faster processing. Customers only need to bring their gold to obtain the funds, making the process easy and uncomplicated.
2. Multiple repayment options
When seeking a gold loan, carefully reviewing and comprehending all available repayment alternatives is crucial. Financial institutions such as banks and NBFCs provide multiple repayment options for gold loan EMIs, such as Regular EMI payment, Paying interest as EMI and Principal at tenure end, Partial Payment, etc. After carefully examining all options, borrowers can choose the repayment alternative that best suits their repayment capacity.
3. Economical Interest Rate
Gold loans have interest rates lower than other loan options, making them a desirable choice for customers compared to personal loans. Interest rates generally range from 8.5-10 per cent annually in public sector banks. The interest rates are slightly higher in private-sector banks. (Note: Check with your lender about prevailing rates when taking a loan.)
4. Processing Fee
Processing fees on a gold loan are either negligible or completely absent.
5. Minimum foreclosure Charges
The foreclosure of a gold loan incurs minimal charges. While some lenders do not impose prepayment fees, others may charge 2% of the outstanding balance.
6. Eligibility Criteria for Gold Loan
Gold loans are accessible to individuals above 18, regardless of their credit score.
7. Minimum Documentation
Gold loans typically require fewer documents to be submitted to the lender. In addition, the credit requirements are more lenient since the borrower is providing a physical and valuable asset to the bank as collateral. As a result, the processing time is shortened, making it a more convenient and expedited way to acquire the necessary funds.
Also Read: Market Insights
8. CIBIL Score Check Not Required
Borrowers with a low credit score may have their loan applications denied by banks and NBFCs. Nonetheless, obtaining a gold loan does not require a favourable CIBIL score. The purity of the gold solely determines the amount disbursed for a gold loan. The mortgage of the gold items provides sufficient security for a bank or NBFC.
9. Productive Use of Idle Assets
Typically, borrowers pledge ornaments they do not frequently use to obtain a gold loan. It ensures that the unused assets are monetized without being sold.
10. Usage of Funds
Occasionally, individuals may require funds on short notice to cover unexpected expenses such as medical emergencies or family weddings. In such circumstances, gold loans can offer funding without constraints on how it is used. It contrasts home or car loans, which may only be used for specific purposes.
11. Loans of High-Value
Gold loans have no maximum limit on the amount that can be disbursed. As long as the borrower can provide the necessary gold collateral, banks/NBFCs will have no issue sanctioning the loan.
Also Read: About available investment options
Gold loans offer a mutually beneficial arrangement for both the borrower and lender. Borrowers can obtain funds at reasonable rates and use them without any limitations. The chances of the loan becoming non-performing are minimal due to the scarcity and appreciation of gold's value over time.
