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Advantages of Opting for a Gold Loan

 Loan against gold is one of the most secured and suitable options that an individual can opt for. In most Indian households, gold articles lie idle in the lockers. Therefore they can be put to use when you need immediate financial assistance in case of emergencies. You can pledge your gold to a financial institution like a bank or NBFC and get immediate funds. 


A gold loan is a feasible option as you do not have to sell your gold ornament and also can get immediate money. However, before applying for a gold loan, you must be aware of its procedure and merits. This article discusses the various benefits of a gold loan and what is the procedure to apply for a gold loan.


What are the advantages of gold loans?

There are certain prompt benefits due to which many people apply for gold loans. If you want to avail of this facility, then knowing its advantages will definitely help you. We are mentioning a few of them below.


Faster processing - If you require immediate funds then the gold loan is the best option you can choose from. Your loan amount is disbursed faster as compared to other types of loans. As the lender already receives the gold ornaments as security, the loan approval and authentication process does not consume much time. 


Credit history is not required - If your loan application has been rejected multiple times due to a low credit score, a gold loan is the best option. Lenders do not consider credit score when giving gold loans as the gold ornaments or coins are already presented by the borrower as collateral. Hence even if the borrower defaults, the lender can recover the money by selling the gold. 


Low-interest rates - Interest rates are generally decided by the lender dispensing on the repayment capacity of the borrower. Unsecured loans like personal loans, home loans, etc. have higher interest rates as there is no collateral provided. Since a gold loan is a secured loan, lenders provide them at low interest rates. 


Higher loan amount - Lenders make use of the Loan To Value (LTV) ratio to decide the loan amount that will be given as a loan. The amount can range from 65% to 90% in the case of a gold loan. Hence you get the maximum amount of gold as a loan. Suppose the value of gold pledged is 10 lakhs, you can get a minimum loan amount of 6.5 lakh and a maximum loan amount of 9 lakh. However, you must remember that the LTV ratio varies from lender to lender. 


Repayment flexibility - The freedom to choose the repayment payment according to your convenience is another added benefit of a gold loan. Unlike most of the loans that need monthly repayment, the gold loan can be repaid using four different methods that are stated below


EMI method - This includes monthly payment for the entire tenure selected by you consisting of principal and interest amount.


Interest payment at regular intervals - You have to pay the interest amount at fixed intervals i.e monthly/quarterly/semi-yearly/yearly and pay the principal amount at the end of the tenure.

 

Upfront interest payment - Pay the total interest amount at the beginning and principal at the end of the tenure. 


Bullet repayment - Pay nothing during the tenure and pay the entire amount including the principal and interest at the end of tenure. 


Income proof is not required - Most lenders do not ask for income proof while giving a gold loan as the loan is secured against gold. Hence anyone can apply for a gold loan. 
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