What are the Benefits of a Gold loan

Gold loan
Gold has, since time immemorial, gained utmost importance in Indian households as heritage and financial security. The value of gold makes it an equitable choice during the financial requirements. Even today, individuals are inclined towards gold loans when it comes to accessing immediate funding. Thus, to keep the money market nimble, most financial institutions extend a loan against gold against simple eligibility. According to a report, India’s gold loan segment witnessed a 33.8%growthat the end of May 2021 in commercial lending sectors. Minimal documentation and easy credit disbursal associated make gold loans beneficial for individuals needing emergency financial assistance. Moreover, the secure nature of gold loans favors borrowers, regardless of market conditions. There are additional benefits of the credit form that are worth understanding for informed borrowing.

How gold loan proves to be a beneficial financial source?

Here are some of the proven benefits of the said credit that borrowers should know before they apply for a gold loan. Substantial credit value  The availability of considerable credits against gold loans makes it a preferred choice among borrowers. In addition, the flexibility of usage makes it further accessible for big-ticket expenses like weddings, business’ working capital needs, medical bills, etc. Technically, the weight of the collateral and an applicant’s credit profile are the primary factors that lenders scrutinize to decide the loan amount. A per RBI, the LTV ratio on loan against gold is currently 90%. This makes it easier for borrowers to access a high loan value. They can leverage this factor by offering at least 24karat gold items. Higher purity assures higher credit availability.

Reasonable interest rates

Being a secured loan variant allows lenders to levy an affordable gold loan interest rate. An applicant fulfilling the eligibility norms and possessing the purest form of gold jewellery is obliged to receive competitive loan rates. This feature gradually reduces the monthly repayments and removes the burden on disposable income. With systematic planning, borrowers can enjoy lucrative savings from the entire process. However, it is important to know that the applicable interest rate is completely dependent on a lending institution. Therefore, for successful borrowing, individuals must compare lenders first.

Multiple repayment options 

The best feature of a gold loan from financial institutions like Bajaj Finserv lies in the availability of multiple repayment options. Borrowers receive the flexibility to choose from repayment options based on their financial capability. They are free to follow the traditional EMI payment that includes both interest and principal. Borrowers can also select to pay only the interest when the tenor starts and settle the principal later. If one decides to repay interest monthly or quarterly, they are free to pay principal at the end of the tenor.
  • No issue of credit score
There are times when loan applications get canceled due to the applicant’s poor credit score. The problem increases when the loan variant is unsecured. Moreover, stringent eligibility parameters make it difficult for individuals to access the funds without a steady cash flow. However, this issue is absent in the case of a gold loan. Borrowers can avail of this loan by submitting the collateral and fulfilling simple eligibility and documentation requirements. Additionally, lenders extend doorstep service and insurance facility that makes the process secure and hassle-free.
  • Instant loan approval and disbursal 
Being a secured credit also makes the loan processing and disbursal faster. Usually, eligible applicants with the right documents and pure gold jewellery can avail of credits in the shortest time. Moreover, certain lenders disburse this loan amount within 24 hours to a borrower’s account. This makes a gold loan a lucrative financial source to address financial emergencies. Apart from the discussed benefits, individuals also enjoy features like a part-prepayment option and no foreclose charges. This boosts up the benefit scale of availing of a gold loan. As a result, individuals can easily leverage the equity of their gold possessions and make the most out of its value.

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