10 Ways Gold Loan is The Best Bet for Your Financial Requirements

Gold has always been regarded as one of the safest stores of money in India. Whether in the form of bullion or jewellery, there would be hardly any Indian household who does not invest in gold. Not only does it offer you a safe avenue to park your savings, but it is also one of the most liquid forms of investment.

You can sell the gold in the open market and arrange money for financial emergencies. But as most Indians have an emotional connect with their gold, selling it off is not a preferable option for many. In such a situation, Availing a Gold Loan is a better alternative.

What is a gold loan?

Gold Loan is a secured loan offered by financial institutions wherein the owner of the gold bullion or jewellery decides to pledge the yellow metal with the lender. Usually, lenders offer up to 75% of the value of the gold as a loan. The valuation is assessed as per the prevailing Gold Rate in India. The rest of the valuation is kept as a margin to offer security against price movements in the market.

As the product is a secured offering, Gold Loan Interest Rates are much lower than Personal Loan and Credit Card interest rates. There is generally no capping on the maximum amount available as a Gold Loan, though this policy might differ across lenders.

Why is Gold Loan one of the best sources for meeting your financial needs?

Whenever there is a financial emergency, you need money on urgent basis. While applying for Personal Loans or other secured loans can take several days, Gold Loan is one of the quickest options at your disposal. Following are the reasons as to why a Gold Loan is the preferred means to your financial needs: 
 

1. Simple application:

The process of applying for a Gold Loan is extremely simple and straightforward. There is no need to take care of lengthy documentation. You need to take your KYC documents (address proof and ID proof), PAN Card, and the gold to the office of the financial institution. You will be asked to fill up a simple application form and submit it along with the xerox copy of the ID proof and address proof.

2. Quick disbursal:

Gold Loans are disbursed within a few hours only, depending on the amount. When you visit the lender, the gold that you wish to mortgage is evaluated by the designated valuer of the financial institution. Then the lender will offer you anywhere between 70-75% of the market value of the gold as the loan amount. To accept the offer, you need to sign the disbursal form, and the loan would be processed. If the amount is below Rs. 2 Lakh, you have the option to take it as cash or through bank transfer. If the amount is above Rs. 2 Lakh, then the amount will be transferred to your bank account only.

3. Available with low credit score:

You can avail of a Gold Loan even with a low credit score. As the mortgage of gold secures the loan amount, the risk involved is reduced significantly for the lender. Therefore, they do not bother much about your CIBIL Score and primarily focus on the purity and weight of the gold offered as collateral.

4. High-value loans:

Gold Loans are ideal for any financial emergency as you can avail loans of up to Rs. 1 crore against your gold. The maximum amount available is also dependant on the prevailing gold rate.

5. Flexible usage:

Even though the gold loan is a secured loan, there are no restrictions from the lenders regarding the usage of the money. Once the money is transferred to your account, you can use it as per your discretion for any requirement that you have.

6. Attractive interest rates:

As gold loans are secured against the collateral, the interest rates are much lower than Personal Loan interest rates. Usually, gold loan interest rates in India vary between 12-14% per annum, thereby making them one of the affordable loan options.

7. Flexible repayments:

One of the biggest benefits of gold loans is the flexibility of repayments. You need not serve any EMIs and can repay the loan as per your financial position during the repayment tenor. You can opt to pay interest only per month and pay the principal amount towards the end of the tenor. You may also pay the entire sum at the completion of the repayment tenor.

8. Extended repayment tenor:

Gold Loans come with extended repayment tenor which can be extended up to 30 months. This allows you enough flexibility to plan your repayments after you have taken care of the emergency on hand. Though, it is advisable to repay the loan as soon as possible and reduce the interest cost.

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