Why Gold Loan is a Good Choice Irrespective of the High or Low Gold Rate in India

Why Gold Loan is a Good Choice Irrespective of the High or Low Gold Rate in India

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18 September 2022

Gold loans have remained one of the most popular options for borrowers in our country, particularly for those who are in immediate need of financial assistance. As a result of gold jewellery providing sufficient collateral in the form of appropriate security, lending institutions have a tendency to be more liberal when deciding whether or not to approve gold loans.

 

Those individuals who are in need of finances and have large jewellery that they can pledge may consider availing themselves of a gold loan for the five reasons that are outlined in the following pointers:

 

Amongst the quickest disbursal

Gold loans likely include the lowest level of documentation required compared to other forms of credit, which enables lenders to promptly distribute the funds for these loans. The money from gold loans is typically transferred into your account on the same day that you apply for the loan, making it one of the quickest sources of credit out of all the available loan options, irrespective of the ups and downs around the gold rate in India

 

No degree of limitations are placed on how the loan money can be spent

Gold loans, much like other types of loans such as personal loans and home equity lines of credit, do not impose any limitations on how the money can be spent in the end. There are no end-use restrictions imposed by the lender on the funds that are availed through a gold loan; as a result, the borrower has the flexibility to use the proceeds of the loan for any purpose, regardless of whether the funds are required for the higher education of a child, the expenses of a marriage, or to cover medical emergencies.

 

Less level of emphasis on one’s credit score

Lenders do not place a great deal of importance on the applicant’s credit score when considering an application for a gold loan because the loan itself is fully secured against the asset that is pledged in the form of gold. Because of this, applicants with poor or no credit score have the opportunity to obtain a gold loan, which is a viable loan option. This is because applicants with poor or no credit score may have difficulty getting other loan options, particularly unsecured loan options because credit score is a vital factor for loan eligibility and even for setting lending rates.

 

Flexible and multiple repayment options

Just like the gold rate in India vary amongst different states, some gold loan lenders provide different and non-EMI repayment options for borrowers. For example. The repayment of the principal component of the loan can be deferred until the loan’s maturity date if the borrower chooses one of the individualized repayment plans that allow them to pay only the interest component of the loan each month. The interest portion of the loan can be paid in full and upfront when the loan is approved, while the principal portion of the loan can be repaid after the conclusion of the loan’s term. This is an alternative method of loan repayment. The borrower has the ability to repay both the principle and the interest component of the loan at the conclusion of the loan term under the terms of the bullet repayment option, which is offered by certain lenders but not all.

 

Borrowers should select the method of repayment from this list that is most conducive to the smooth operation of their financial flows and as per the prevalent gold rate in India. For instance, because the ongoing pandemic has interrupted the money inflow of many people, the non-regular EMI repayment options, such as the bullet payback option, may prove to be beneficial for those who are contending with constrained cash flows. On the other hand, individuals who are assured of their income on a consistent basis have the ability to choose the option of regular EMI payments. This is because regular servicing of the principal component of the loan right from the start of the loan tenure results in a lower overall interest cost in comparison to the other repayment options.

 

Enables you to utilize the asset rather than selling it, saving you time and money.

Instead of selling your gold to satisfy your financial needs, you may leverage it by taking out a gold loan and putting it up as collateral. You can do this by pledging your gold. In contrast, monetizing the gold by selling it would cause you to lose ownership of it in order to obtain the necessary monies based on the gold’s value, whereas this method enables you to receive the pledged item back from the lender once the loan’s payback has been completed.

 

Final words

Due to the multiple benefits that they offer, gold loans rank higher than the vast majority of the other loan options that are available. Due to the fact that gold loans are secured by the borrower’s gold, lenders typically do not consider the applicant’s credit score when making a decision about whether or not to grant the loan. Because of this, gold loans are an excellent option for people who have no credit score or a score that is low. However, salaried applicants who are employed in reputable firms and have a strong credit record may be able to acquire personal loans or other loans with lower interest rates and longer repayment terms. 

 

Therefore, when searching for the appropriate loan choice as well as the lender who is best suited to one’s needs, one can look into online financial portals. The customer is matched with the most appropriate set of loan options and lenders on such markets, which are determined by qualifying criteria such as income, credit score, employer profile, gold rate in India, and so on.

 

Overall, it is also crucial to remember how important gold is as an asset. Besides the positives of a gold loan, don’t forget to keep in mind that you need to repay it even if it is easy to access the loan quickly anyway. If you fail to repay the gold loan and default on it, you are likely to end up losing the pledged gold.

 

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