Gold has, for time immemorial, been considered an asset owing to its value appreciation. In India, borrowers leverage their gold’s equity to finance urgent monetary requirements such as education, medical expenses, business expansion, etc.
This is especially true for economically backward families, where gold has always been the preferred mode of investment. Nowadays, with the advent of organised lenders, the social relevance of gold loans has received a further boost.
If borrowers require emergency cash to fund their personal or professional financial requirements, they can consider choosing a gold loan extended by reputed financial institutions. These loans are one of the quickest and hassle-free methods to acquire substantial credit.
Relevance of gold loans during the financial crisis
A gold loan is a secured credit option where borrowers can avail funds by pledging their gold ornaments. The lenders sanction a certain percentage of the loan amount against the gold’s value. Unlike other secured loans, a gold loan does not come with any end-use restriction. So, it is a great way to meet urgent financial requirements.
The entire process of availing gold loansis similar to secured loans, and borrowers can avail them by meeting basic eligibility parameters and producing certain documents. Lenders evaluate the purity of gold and verify the documents before sanctioning an amount.
Being secured in nature, the gold loan rate of interest is comparatively low in terms of unsecured loans. But borrowers must note that the interest rates on gold loans depend on several factors and vary from one financial lender to another.
Therefore if individuals plan to opt for gold loans, they must conduct in-depth research regarding different financial lenders available in the market to avail competitive interest rates.
Benefits of availing gold loan
Gold loans can prove to be extremely helpful during a financial crisis. There are certain benefits that individuals can avail of from loans against gold. A few of these are as follows:
- Quick processing
The first and foremost benefit of this kind of credit is hassle-free and prompt loan processing. Since the gold loan is availed against collateral, financial lenders often extend substantial loan amounts. This is one of the reasons why financial institutions disburse gold loans within a few hours.
- Good investment
Gold has always been considered a beneficial investment option for individuals. It is gold that acts as a financial safeguard against any type of monetary crisis faced by individuals. As gold prices fluctuate every day, it is wise to invest in gold to ensure a secured future.
- Flexible repayment procedure
Another essential benefit of a loan against gold is the repayment procedure. Financial operators like Bajaj Finserv offer a comprehensive suite of flexible repayment options for gold loans. For example, borrowers can repay the interest amount monthly/quarterly and principal at the end of the tenor.
Alternatively, they can choose to pay the entire interest amount at the beginning of the tenor and pay the principal later. Lastly, borrowers can opt for traditional EMI payments, including the principal and interest components.
Flexible repayment options allow borrowers to settle the loan outstanding at their convenience and avoid accumulating debt.
- High loan amount
Individuals can avail of a considerable loan amount against their pledged jewelry. This is because the sanctioned amount depends on the LTV ratio, which says that borrowers can now avail 90% of the loan amount against their pledged asset.
The RBI has extended the LTV cap for a gold loan, considering the economic distress faced by professionals in different sectors due to the pandemic.
On top of that, if borrowers pledge pure gold items ranging from 18-24 carat, they can even negotiate with the lender to avail of the lowest interest rate on a gold loan.
Apart from these benefits, a gold loan comes with easy eligibility and minimal documentation. Borrowers can apply for this advance online by filling a simple application form on the respective lender’s website and enjoy quick approval.