How CIBIL score gets help from Gold Loan

Gold has more than just monetary value in our country. It is considered a status symbol. A precious metal with which people have an emotional attachment. People usually take a gold loan to fulfil their urgent need of funds may it be for any emergency purpose or leisure. In a gold loan, the borrower pledges some gold at the bank or the NBFC and in return gets a loan of a certain value. The repayment of the loan is bound to the tenure chosen by the borrower and is paid in EMI’s ( Equated Monthly Instalment). The profit of the bank in giving out the loan is the interest that it charges on the loan. The monthly EMI is a mixture of loan principal amount and interest. The central bureau maintains a record of each EMI paid and the borrower’s payback pattern. 

Not many people know but each timely payment of EMI contributes to their credit score and also each default in payment. CIBIL score is an important factor that lending institutes consider while offering any loan. In the case of a gold loan cibil score of the borrower is not the priority so even an average score would do just fine. This is because the loan is secured by pledging gold to the institute.  

An individual doesn’t need a good credit score to avail of a gold loan but their availing of a gold loan improves their credit score. The timely repayment of the gold loan EMI’s contributes to the growth of credit score. These days Gold Loan Per Gram is an offering by most lenders. Under this scheme amounts as low as the equivalent of 1gm gold can be availed. This scheme enables people with a low financial background to also avail themselves of gold loans. A credit score is calculated by taking into consideration of four factors. They are as followed:-

• Credit history - Your old credit repayment behavior is analyzed. Default in payment of EMI on time could impact your credit score.
• Total Debt - This takes into consideration your total debt to income ratio. The rising debt could impact the growth of your credit score.
• The balance between secured and unsecured loan - A proper balance between secured and unsecured loan has to be maintained. Too much of either could be bad in long run.
• Frequent Enquiries - Too many credit score enquiries could have a negative impact on your credit score.

Thus these are the factors considered while the bureau calculates an individuals credit score. Gold loan offered by various lending institutes at varying rate of interests. Muthoot Finance Gold Loan is an offering by a pioneer in this field. Interest rates starting at just 12% per annum. It is one of the only few to provide gold loans of a lower limit of 1500 rupees only with no upper limit. They also provide a flexible repayment system with tenure of the loan ranging from 7 days to 36 months. The best part being no foreclosure charges meaning that the loan can be settled before its maturity at no extra cost. This makes the bank and its offering flexible and user friendly. Therefore gold loan can contribute to the growth and fall of your cibil score but when used wisely it will contribute to your credit score which will make it easier for you to avail any type of loan at better offers. 

Conclusion: CIBIL score has its importance but the majorly in unsecured loans segment. In gold loan collateral is involved therefore the need for a good credit score is not a priority but on the other hand, the gold loan repayment will make your credit score strong and that has many benefits.

Also read this: Is it Safe for me When we Avail of the Gold Loan?