About gold loans Gold loans are basically loans that are offered against your gold articles at a fixed interest rate. Even though the interest rates can vary from bank to bank, it usually lies between 7 to 12 percentage depending on the loan tenure. Other than banks, there are financial institutions that specialize in handing out gold loans, some of which are quite famous, like Muthoot Finance Corporation and Karur Vysya Bank Gold Loan. But just like any other service in the market, there are certain myths regarding gold loans as well. The processing fees of such loans can be from 1% to 3% of the loan amount. Gold loans can be acquired for amounts as low as Rs.1500. We will, in this article, try to bust some of these myths.
Myth 1 :-
Gold loans can be a hassle-inducing process Many believe that gold loans can be a tiresome process including a lot of paperwork and documentation. Truth be told, it is literally the opposite. Unlike normal loans, as you are giving something in return for the money, the process is more of a smoother sail. The loan provider has not got to worry about getting the money back as they have your gold as security, and hence gold loans are easily handed out. Nowadays, on proper documentation being presented, gold loans are even handed out on the spot!
Myth 2 :-
It has high interest rates Many people may or may not go forward with gold loans thinking the Gold Loan Interest Rate are low/high compared to personal loans. But gold loans do have varying interest rates, ranging from anywhere between 7% to 26% on average depending on the financial institution. Also, the interest rates depend on your credit score and overall profile.
Myth 3: Only jewelry is accepted against a loan This is a major myth, but the government has provided detailed guidelines which mention that gold articles can also be mortgaged against a gold loan.
Myth 3 :-
Security concerns Many people opt out of gold loans as they believe it is not safe. But if you choose a legally registered, well-reputed institution, there is nothing to worry about.
Myth 4 :-
Confusion regarding repayment tenure Many customers are misguided about the repayment tenure. The common repayment tenure for the gold loan ranges from 1 to 7 years.
Advantages of a gold loan :-
The major advantage of a gold loan is that it is instant and can literally be received within hours. Therefore it is especially useful if you urgently need cash in hand. A gold loan is secure and you need not worry about the safety of your gold. The loan to value (LTV) ratio is higher when it comes to gold loans. There are various payment options for customers where either you can pay the interest/principal amount at first or pay via the EMI method.
Conclusion :-
Things to be aware of :- Every financial aid that we can avail from the market has its own upsides and downsides but is always necessary to be educated and informed about the right information regarding the same. Myths that go around can sometimes cause losses to us in the long run. Hence always before seeking financial solutions, make sure that you research very well regarding various options and go forward with the most viable one. Many customers get attracted by the low interest rates and quick transaction speed and jump into it but end up struggling to pay. So while availing gold loan, make sure that you get into one that can be afforded by you, where you can repay the EMI from time to time regularly, as the financial institution has the right to claim ownership of your gold otherwise.