Gold - An Invaluable Asset!
Gold is considered as an important investment option by Indian families. It can be conveniently purchased in the form of jewellery, bullion, coins etc.
Gold Loan facility
Financial uncertainties can knock your door whenever. In India, money lenders & creditors offer loans on gold in times of urgency. Apart from this, banks provide credit in terms of loan on Gold, too. This loan is generally secured in nature, and is given against a security.
In case of secured loans, the banks give you the money required in exchange for a mortgaged asset. These loans come with low-interest rates. Also, your asset ownership is protected as you are mortgaging the asset instead of selling it off.
Availing Gold Loan
A gold loan is a secured loan. You can avail a loan amount up to 80% of the market value of the amount of gold you are mortgaging. Taking a loan against your gold is a very easy method to fund your financial needs.
Applying for a gold loan requires minimal documentation. After the submission of the application and the gold, the amount is easily disbursed and can be used to finance your needs.
The Interest Rate Of A Gold Loan
Just like any loan, a gold loan also comes with an interest rate. This interest rate is levied on regular payments towards the loan. Gold loan interest rates range from 9% to 13%, depending on the lender you choose to borrow from.
Why Should You Take A Gold Loan?
Gold loan is the best way to go about in case you need quick funds.
There are no hidden charges involved if you avail a gold loan.
Gold loans have relatively fewer interest rates as compared to personal loans, etc.
Gold loans come with flexible repayment options.
The gold which you give as security is kept safely by your bank without any additional charges.
These loans come with low pre-closure charges.
Benefits of Taking a Gold Loan
Gold loans give you quick cash when you are in need. A gold loan comes with various benefits like:
a. Making use of the unused gold as a financing option.
You can mortgage gold and fund immediate requirements like funding education, buying a car, etc.
b. Easy and fast loan processing
You can get a loan against gold in a few simple steps. These loans are backed by an expensive asset. The banks prefer loans against gold as they can quickly sell off the gold in case of any default from the borrowers’ end.
c. Low-Interest Rates
Gold loans come with a lower interest rate when compared with personal loans.
d. Fewer checks on credit history
The gold furnished as collateral by borrower has a higher value than the loan disbursed. Typically customers gets 85% of the value of the gold as loan amount. Therefore, banks typically conduct lesser credit checks.
Disadvantages of taking a gold loan
a. The gold will be valued at a lower price in case of jewellery as compared to gold coins and bars
If you decide to mortgage your gold jewellery, it will not have the same valuation as gold coins or bars. This happens because of the presence of other metals which are brought to use in molding the gold into various shapes to make a piece of jewellery.
b. The cost of stones is reduced in case you mortgage gold jewellery
You might have bought that gold at a much higher price due to various precious stones embedded in it but while taking a loan, only the value of the gold will be taken which reduces the value of the jewellery piece.
c. In case of default, you lose all your gold
Your loan might be a fraction of the value of the gold mortgaged, but in case you fail to make any repayments, you will lose out all of the gold mortgaged, however if the bank's recovery through sale exceeds principal + interest, the excess amount is transferred to the borrower.
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