What is a Gold Loan and why should you opt for it?
Simply put, a gold loan enables you to acquire a loan easily and securely from a lender by using your gold as collateral in exchange for cash. The demand for a gold loan has been increasing year on year to meet various expenses. Many households prefer to use a gold loan to meet their expense like marriage, health, education, etc. Gold loans can also be used by various businesses, especially entrepreneurs to run their operations smoothly.
Gold loans can be acquired for a certain tenure and be repaid through various repayment plans. The amount of loan provided by the lender is based on the percentage of the gold value (may vary upon the market price). Interest has to be paid to the lender which may vary across lenders.
How does a Gold Loan Work?
Gold is generally passed from generation to generation, or a person buys gold from his hard-earned money as an investment. Thus, the individual might have an emotional attachment to their gold ornaments and hesitates to use them for any other purposes. However, this idle gold can be used to acquire a gold loan to help them meet various financial emergencies.
Before applying for a gold loan, the gold must first pass a quality inspection to ascertain its purity and weight, which determines its market worth. The individual must then give the necessary paperwork to complete their KYC. Following this, the lender and borrower sign an agreement that may include information about the gold, interest rate, and payment. The lender will take the gold and safeguard it after the procedure. The gold is given back to you once the borrower has paid out all monthly installments and interest.
A gold loan can be used by individuals for various purposes:
People frequently need money to keep their business operations running, so they can use a gold loan to raise money or set up an overdraft facility. This provides several advantages for those who don’t have to sell their gold to raise money. Compared to other loan products, gold enables individuals to obtain funding at a relatively cheap interest rate. In contrast to other typical overdraft solutions, which require headaches and extensive documentation, the consumer can immediately get an overdraft facility.
Gold loans can help one to attain financial freedom. This is especially helpful in the case of women entrepreneurs. Generating money to fund a business is one of the main challenges that most women confront. In these situations, they can just utilise the gold that is sitting around the house or in the bank lockers to assist the woman to launch a new business or grow an existing one. The consumer can profit in several ways, including borrowing money at a cheaper interest rate and regaining possession of her gold when the loan has been repaid.
Along with these specific circumstances, this will also have a favorable economic effect because the money obtained through the gold loan would be further distributed in the Indian market.
Why should one consider getting a Gold Loan?
- Short-term fund requirement: People requiring funds for 3-6 months can opt for a gold loan to fulfill their personal / business requirement for funds.
- No CIBIL score required: As the gold itself acts as collateral, the lender is comfortable in providing the loan and thus, the individual’s CIBIL score isn’t considered.
- Time: The process for a gold loan is simple the borrower just has to get his gold checked and submit it after the necessary documentation and procedures. After these procedures and upon approval, the amount is disbursed immediately.
When someone needs money urgently, a loan against gold might assist them in raising the money they need. It is a simple, secure and quick way of borrowing money against goods that have high store value and are in high demand.