Does Applying For A Gold Loan Require Having A High CIBIL Score?

When it comes to applying for loans, we always think about high credit scores to get low interest rates. But over time gold loans have gained more importance compared to other loans. They are an extremely popular choice amongst folks who need a hassle-free and quick solution for their finances. 

By using gold assets and investing in them, individuals can grow their finances exponentially, secure loans for several purposes, and gain wealth in the long run. However, applying for a gold loan is very easy, you can directly apply online from your home. Loans against gold are secured loans that are availed by pledging gold items. To know how you can secure the same, keep reading this post.

Secured vs. Unsecured Loans: The Basics

Before you get into the specifics of the CIBIL score, take some time to understand the difference between unsecured and secured loans. 

Secured loans like gold loans are backed by collateral. On the other hand, unsecured loans, like personal loans, do not require collateral but rely heavily on the borrower’s creditworthiness and financial history.

What Is the CIBIL Score and Why Does It Matter?

CIBIL scores are numeric representations of an individual’s creditworthiness and it is based on one’s credit history. CIBIL score is determined by data provided to Credit Information Bureau (India) Limited (CIBIL) from banks. Ranging from 300 to 900, a higher score indicates a lower credit risk, while a lower score suggests a higher risk. CIBIL score plays a vital role for both banks & borrowers. Banks determine the trustworthiness of the borrower and a borrower gets low interest rates if his CIBIL is high. While there is no minimum CIBIL score required to get a gold loan, but some lenders may count this as a plus point.

What Are The CIBIL Credit Score Ratings?

1. Excellent: 800-900
2. Good: 700-799
3. Fair: 600-699
4. Poor: Below 600

How to Check Your CIBIL Score

Monitoring the CIBIL score is important as it gives you insight into credit health and also helps you understand the eligibility for several financial products. You can easily obtain your CIBIL score through channels like the CIBIL part of the Transunion website or other bureaus.

How Banks/NBFCs Determine CIBIL Score

There are several factors that banks evaluate and understand when it comes to understanding your CIBIL score. This also includes the repayment history, credit history, credit utilization, recent inquiries, credit accounts, and loads more. These factors help you paint a picture of the creditworthiness of your bank account as well as your financial responsibility.

How To Improve Your CIBIL Score?

• Pay Up Your EMIs
  It is not enough to make an EMI payment. You need to ensure they are done on time so that your CIBIL score is always high. For a better credit score, try to pay EMIs within 2-3 days of bill generation. Delaying them will be noted within your CIBIL report and this affects your chances of getting a loan. Hence you can set up automated transfers so that you pay on time and your funds are not easily affected. This will easily improve your score and prevent rejections from loans. 
• Limit The Utilization
  Utilizing way too much credit will show the lenders that you can’t live within your income lines. So when you are utilizing the credit, make sure that you stay within limits. It’s recommended to use up to 30% of the total limit for ideal uses. However, you can utilize your 100% limit. It is also essential that you use credit only as much as you will be able to repay. You can also ensure that your credit usage does not cross half of your income. Ensure you take all the measures indeed like paying the full balance and not using your credit card to the full limit constantly.
• Report All Kinds Of Discrepancies
  Apart from that, if your reports have any kind of discrepancies, make sure that you are checking them frequently and making changes as and when needed. For example, your scores could be low because your lender has not updated CIBIL on all the latest payments. Keeping track of the same will help you avoid errors. 
• Different Types of Loans/Credit Card-
  Having both secured and unsecured loans/credit cards can boost your credit score in different ways. Secured loans, like home loans or car loans, are backed by collateral, which reduces risk for lenders and shows responsible borrowing behavior. Unsecured loans, such as personal loans or credit cards, demonstrate your ability to manage credit without collateral, showcasing financial responsibility. By responsibly managing both types of credit, you can build a diverse credit profile, which can positively impact your credit score over time. 

Is CIBIL Required for a Gold Loan?

Contrary to popular belief, a high CIBIL score is not a strict requirement for securing a gold loan. Since gold loans are secured by collateral (the gold assets), lenders are less concerned about the borrower’s credit history. Even individuals with low or no credit scores can avail themselves of gold loans, making them accessible to a wider demographic.

However, while a high CIBIL score may not be mandatory, it can still influence the terms of the gold loan. Borrowers with excellent credit scores may qualify for lower interest rates and more favorable repayment terms, enhancing the overall cost-effectiveness of the loan. So does a gold loan affect Credit or CIBIL score? Yes, especially if there is any hard inquiry. 

What are the benefits of buying a gold loan to improve your CIBIL score?

When you borrow a gold loan, remember that the gold will always be used as a type of collateral by NBFC/Bank or the lender itself. Since the loan you are purchasing is a secured loan, the interest rates are competitive. But if you don’t end up repaying the loan, the lender will be able to get the security to make up for the lost money.

The best benefit of a gold loan is that it lets you repay your loans over some time. You could spread your repayments using installments which will make it easy for you to repay them on time. When you make the repayments against the debts you have taken, it will easily impact the CIBIl score. If you know someone who doesn’t have a good credit score, you will be able to observe some level of improvement in the score over some time.  However, make sure that the gold loan EMI is paid on time so that you don’t have to face any negative consequences.

SahiBandhu Gold Loans – Your Key to Personal & Emergency Finance

At SahiBandhu, we understand the diverse financial needs of our customers. Our gold loans offer a convenient and reliable solution for those seeking immediate funds without the hassle of extensive paperwork or stringent gold loan eligibility criteria. With competitive interest rates and flexible repayment options, SahiBandhu Gold Loans empower individuals to leverage their gold assets effectively.

Conclusion

Overall, when you apply for a gold loan, always remember that you don’t need to have a high CIBIL Score. However, maintaining a good score is still beneficial as it could lead to more loan terms as well as low-interest rates. By simply choosing SahiBandhu Gold Loans, you will be able to unlock the full potential of the assets while meeting your usual financial needs with confidence.