Benefits and Disadvantages of Gold Loan

What are the Merits of Gold Loan?

After learning about the process for applying for a gold loan, you'll want to learn about the benefits of taking out a gold loan and why so many people prefer this secured loan option.

1) Lower Interest Rates

Everyone needs their loan facility to have lower interest rates. Since it is a secured loan, a Gold Loan could be the better option for you. Your gold will be used as leverage to secure the loan. The interest rates on Gold Loans vary from 9% to 20% per year, but on average, they are between 10% and 16 percent per year.

2) Higher Loan Amount

A gold loan allows you to borrow the maximum amount possible against your pledged gold jewelry. The Loan-to-Value Ratio is used by lenders to calculate the loan amount (LTV). In the case of a gold loan, this ratio will range from 65 percent to 90 percent. This ratio indicates that you can borrow up to 90% of the total gold value and as little as 65% of the total gold value.

3) Flexibility in Repayment

• EMI Method –The Tenure will be paid in monthly installments, with a portion of the principal and interest paid each month.
  
  
• Interest is Paid Regularly – Pay the interest at regular intervals – weekly, quarterly, semi-annually, or annually , and the principal at the end of the term.
  
  
• Interest Payments in Advance – Pay the entire interest rate upfront and the principal sum at the end of the term.
  
  
• Bullet Redemption – Make no installments for the lifetime of the loan. Rather, pay both the principal and interest at the end of the year.
  
  

4) Faster Processing

If you need money as soon as possible, a gold loan could be the best option for you because you will get the loan sum much quicker than with other types of loans. As we stated in the procedure section, the loan sum is disbursed into your account as soon as the paperwork and authentication are completed. Furthermore, since you are using your gold reserves as collateral, lenders are fast to disburse the loan.

5) No Need for Credit History

If you've had several loan applications denied due to a bad repayment history, a gold loan might be a good choice for you because lenders don't look at your credit history before granting you the loan. This is due to the protection you have offered in the form of gold ornaments or bank-minted coins. A gold loan is ideal for those who are looking for a loan with lenient eligibility requirements. But better be aware of gold rates where you live. Suppose you are in Chennai, then it better to know about the Gold Rate Today at present as it will help you to evaluate your gold value.

6) Demerits of Gold Loan?

You can Lose your Gold Assets, As you might be aware, you obtain a loan against your gold assets in the form of jewelry and coins, and you receive your ornaments back from the lender after the loan has been completely repaid. However, you should keep in mind that if you do not repay the loan or default, you risk losing your properties because the lender will settle the loan by selling your ornaments. 

7) Impact on CIBIL Score 

Your credit history is not checked when the loan sum is issued, but if you miss a payment, your CIBIL score will be negatively affected. As a result, it's a good idea to pay back the loan in full as soon as possible, using whatever form you selected at the time of application. On top of that, on-time payments will help you increase your credit score.

CONCLUSION-

The gold loan is always seen as a better option if you had a bad credit history. Some many banks and NBFCs offer gold loans as they are aware of the opportunity that gold can bring to you and also to them. Banks like SBI offer gold loans at a cheaper rate. The gold loan offered in SBI Bank is better in comparison with other banks. So it is better to go with market search to get the best deals for yourself.  

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