Gold loan is the friend who extends its hand for help at times of crisis, especially a financial one. Gold loans are considered convenient short-term borrowing options and furnish a sum of money for meeting every kind of demand of the borrower. But before taking a gold loan, one must assess all the merits and demerits of a gold loan as default to pay the loan amount that seizes not only the gold but also hurts the CIBIL credit score.
Gold ornaments and bank minted gold coins can help the borrower to get a gold loan, evaluated on the basis of overall gold value. Among many other reasons people prefer gold loans over any other loan which are affordable in terms of gold loan interest rates and other facilities. The application of a gold loan is primarily divided into four parts: submission of gold, evaluation of gold, official documentation work, and the authentication.
Gold loans are going good in the rising market of loans. But if a person does not have enough capacity to repay the loan amount, it is better to avoid the loan against gold. The amount of repayment includes the principal amount borrowed from any bank or NBFC and at Sab the interest attached to it. One must know the advantages of getting a gold loan before deciding to choose the secured loan facility provided by it. If a person is looking to get funds against gold jewelry, these advantages can help him.
For every individual who wants to get a loan facility with lower interest rates, a gold loan can be the preferable option as they secured loan charges at budget-friendly interest rates. The gold that the borrower raises must be within 18 to 24 carats as this acts like the whole lateral against the loan amount. The interest rates of gold loans generally range from 9 % to 20% per annum, but on average, it can range from 10 % to 16% per annum depending upon various factors and the lending institution. If a person has already maintained a good relationship with the bank, it can enhance the chances of gold loan approval, and the lender can provide him with lower loan rates. State Bank of India provides Gold Loan at the interest rate of 7.5 %; the ICICI bank provides it within the range of 10 % to 19.7 6%, HDFC Bank provides it from 9.5 % to 17.5 5%, Muthoot Finance Gold Loan interest rate ranges from 12 % to 27%, and Manappuram gold loan rate per gram depends upon the interest rate of minimum of 12% and maximum to 29%.
Assess the person to get maximum loan amount against SBI gold pledge by him as bi loan to value ratio determined by most banks and NBFC range from 65 % to 90%. This means that a person trying to get a gold loan pledging his gold can 90% of the overall value of the whole depending upon the weight and purity and, in the worst case, can get as low as 65% of the value. Further, the loan borrower gets the freedom to choose the repayment option according to his convenience when he applies for a gold loan facility. Repayment is the most integral part of any loan, and gold loans have different repayment methods. The most famous four methods are the EMI method, interest payment at regular interval method, upfront interest payment method and Bullet repayment method. If a person is in emergency need to get fund, then a gold loan can be the best alternative as the loan amount gets disbursed faster than any other type of loan.
This is because the procedure of documentation and authentication is done swiftly, and the loan amount gets disbursed into the borrower’s savings account. Moreover, the loan application does not get rejected multiple times by the lending institutes due to poor credit history or low credit score. Therefore a gold loan becomes an acceptable option for people who do not have a remarkable credit history in giving the loan amount back. The reason behind this is the security provided by the borrower in the form of gold ornaments or Bank minted gold coins to the lender.
But there are a few constraints of gold loan that must be taken into account. If the repayment of the gold loan is not made timely, the borrower may lose his assets, which can further impact his CIBIL credit score negatively. So it is advised to repay the gold loan amount on time to save the gold and keep the credit score stable.
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