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What are the Different Benefits of a Gold Loan?

Madhavi Sharma

As a high-value asset, individuals can liquidate their gold ornaments to meet financial emergencies. The value of a gold loan enables individuals to fund medical expenses, children’s higher education, business set-up, down payment of vehicle purchase, and many more. Read on to know more about gold loan benefits.

9 Major Benefits that make gold loan as best option for Instant Funds

1. Lower interest rate

Gold loans are a secured financing option, which means individuals need to pledge their valuables against securing a loan. This helps in keeping the interest rates of a gold loan comparatively lower than any other loan variant. Therefore, lenders can easily trade the pledged collateral to overcome the loss in case of any default.

Therefore, with a lower gold loan interest rate, individuals can reduce the repayment amount significantly and utilize the saved-up money for other purposes.    

2. Easy repayment option

One of the major gold loan benefits is the flexibility to repay the loan amount. Individuals can choose from a wide variety of repayment options. Such as,

  • They can opt for bullet payment and repay the principal and interest at the end of the loan tenor.
  • Individuals can pay interest as EMIs and the total principal amount upon maturity. 
  • Also, individuals can choose to pay interest and principal amount as per their suitability partially.
  • Lastly is the regular EMI payment option, which includes paying both the principal and interest amount till the end of tenor.

With such a variety of convenient and customized repayment options, repaying a gold loan is no more an issue.

3. High loan amount

Gold loans have gained popularity among borrowers due to their guaranteed high loan amounts. 

As per the current regulatory cap imposed by RBI (applicable from gold loans sanctioned on and after 2021), individuals can get 90%of LTV (Loan-to-value ratio) against their pledged gold. It means if gold jewellery (excluding the value of gems and stones) values Rs.1 lakh, individuals can get a loan amount of up to Rs.90,000.

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With such high LTV, individuals can easily fund their big-ticket expenses. Reputed NBFCs like Bajaj Finserv offers the best gold loans up to Rs.1 crore with high LTV.

4. Simple eligibility

Unlike other unsecured borrowing options where lenders set strict eligibility to safeguard their money, a gold loan comes with easy-to-meet eligibility criteria. As a result, individuals (be it salaried or self-employed) can apply for a gold loan and secure funds. 

Most importantly, in gold loans, individuals need not worry about credit scores. As lenders are assured of their payment, they grant the loan without scrutinizing much about a lender’s credit score eligibility. It is certainly one of the biggest gold loan benefits for individuals with a poor or no credit profile.  

5. Hassle-free documentation

Before sanctioning loans, lenders usually ask for a lot of details and documents to support that information. These include income proof, salary, tax records, and many more. However, this is not the case with gold loans. 

In loans against gold, individuals have to furnish only KYC documents like income and identity proof. Therefore, it is evident that the documentation of gold loans is much simpler as compared to other unsecured borrowing options. 

6. Faster processing

Gold loan ensures faster and straightforward processing. As borrowers need to submit only a handful of documents, lenders can process the loan quickly and disburse the loan amount, usually within few hours of application. 

The faster processing time helps individuals save time (unlike other unsecured financing options where individuals need to visit a lender and wait for days or even weeks to get approval and disbursal) and efficiently manage their personal financial needs. 

7. Door-step service

The gold loan comes with other major beneficial features like door-step service. Currently, several lenders offer door-step gold loans. 

Individuals can apply for an online gold loan from the comfort of their home and get the funds transferred to the bank account within few hours of application. From gold appraisal, document verification to disbursal, all the procedures are done in the presence of the gold loan executive of the respective lender.

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8. Robust security

While opting for gold loans, individuals need to worry about the safety of their valuables as a gold loan scheme assures robust security. 

After collecting the gold items from an applicant, financers store the collateral in a highly secured vault. Few lending institutions also offer insurance coverage on the collateralized gold items against theft and misplacement.

9. Flexibility of use 

Unlike unsecured loans, gold loans do not have end-use restrictions. It means individuals can use the amount as per their financial needs without worrying about the lender’s interference. Hence, individuals can use this money to cover any expense.

The above-mentioned gold loan benefits are the primary reasons for their immense popularity in the Indian loan market. With proper knowledge, individuals can reap the maximum benefits of this secured financing option.  

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