Benefits of availing of a gold loan -
1. An existing asset can be used - In gold loans, the borrower can use an existing asset, which is rarely used to generate money, to avail of a loan. The gold owned by the borrower can help in obtaining instant cash by serving as collateral and the gold would be back in the possession of the borrower after the loan amount is repaid by them.
2. Repledging - There is no restriction on the number of times an individual can use the same piece of gold to avail of a loan. This would not be possible in the case of loans such as personal loans as that depends on the creditworthiness of the individual.
3. Flexible repayment structure - Banks and other financial institutions provide a flexible repayment structure in the case of gold loans. The borrower has the option to repay the loan amount through equated monthly installments (EMI), advance interest payments, interest payments at regular intervals, or even bullet payment which refers to paying the principal amount and the total interest charged upon it directly at the end of the loan tenure.
4. Low-interest rates - Being a secured loan, the rate of interest charged by banks and other financial institutions on gold loans is lesser than the rate of the interest charged on unsecured loans such as personal loans.
5. No processing fees - Banks and other financial institutions such as IIFL Gold Loan do not charge any processing fees on gold loans at all while some banks may charge a processing fee, which is usually as low as 1%.
6. No foreclosure charges- Most banks and other financial institutions do not charge any foreclosure charges on gold loans at all and even if some banks may charge a processing fee, which is again as low as 1%.
7. Simple Eligibility - The eligibility criteria of a gold loan is simple, anyone above the age of 21 who possesses gold and all the required documents, be it a salaried employee, professional, farmer, or trader, can apply for a gold loan.
8. Simple documentation - The documentation process involved in gold loans is simple and minimal. Only proofs such as identity and residence are required.
9. No income proof needed - Since gold loans are secured against the gold provided by the borrower, the banks and financial institutions do not require any proof of income from the borrower.
10. Low credit score - Gold loans can be availed by anyone even with a low credit score. Unlike other loans, where the loan is approved based on the creditworthiness of the applicant, in gold loans, the loan is approved based on the purity, weight, and current market value of gold.
11.The flexibility of use - There is no limitation on the use of the amount availed through a gold loan. There is the flexibility of using the funds for any legal purpose.
12. Fast Disbursal - The eligibility criteria of gold loans are simple and minimum documentation is required and with the assistance of online facilities, the approval and disbursal process of gold loans has become very quick.
13. High LTV - LTV refers to loan to value, banks and financial institutions provide a loan against a certain percentage value of the gold provided as collateral by the borrower. Some banks provide a loan-to-value ratio of up to 75% based on factors such as the purity, weight, and current market value of gold.
Gold loans are a quick way for individuals to meet their urgent financial requirements. It is considered a beneficial and a less risky option because of the low interest, simple eligibility, and various other factors mentioned above. The borrower should assess their financial needs and goals and accordingly decide to apply for a gold loan.
Also Read:- MYTHS ASSOCIATED WITH GOLD LOAN