Advantages of Gold Loan

In the case of a gold loan, if you are planning to repay the gold loan inside the following year, a gold loan is considered the ideal option. In gold loans, you have to keep gold in the form of jewellery, coins or bars as security. Bank offers 80% of the value of gold as a loan.

The main advantage of gold loan are :

I. Interest rates of gold loan:

Interest rates are much higher in the case of other forms of loans. For example, interest rates vary from 15% to 19% in other forms of loans, but the Gold Rate Today is as low as 9% in the banks. This makes gold loans a much better option to afford for a larger number of people. Therefore, it is advisable to take gold loans.

II. Loan disbursement within a shorter period and time:

Gold loans are secured and safe loans and thus includes mild eligibility criteria. In the case of personal loans, it could take 2-3 days for the loans to get disbursed. As in the case of a gold loan, you have to collect your valuable gold, which you will be putting as security and carry along. I'd proof like an Aadhar card. There is a 100% chance you will come back with the loan amount within an hour. The procedure of disbursement is not time taking, unlike personal loans. Gold loans are very useful for emergency purposes where someone has to take a loan in an immediate situation. This is particularly true when you walk into gold loan companies like Muthoot Finance and Manappuram Finance, which gives you quick loans with lower interest rates. Lenders generally disburse the loan very easily in an hour.

III. Lower processing fees of gold loan:

The processing fees in the case of gold loan is very less even in some cases it is as low as zero—most banks charge 2.5%-3% in the processing of personal loans. Even home loans and car loans attract an adequate amount of processing fees. Whereas HDFC Gold Loan charges a minimal processing fee of 1.50% on the gold loan amount.

IV. No need for income proof:

Home loans, car loans and personal loans all necessarily require their customer to present some income proof and statement based on which loans are disbursed. It is nearly impossible for one to get a loan without an income statement, bank statement, salary proof etc. Gold loan is an exceptional case.

V. No credit history needed in gold loans:

Just like no statement proof, there is no credit history needed in gold loans. For example, if you apply to get a personal loan and your credit history is not good enough, you are not eligible for the loan anymore. The bank flatly refuses to give loans to customers without a good credit history. For gold loans, credit history does not even count as gold is kept as security. This makes gold loans more advantageous.

VI. In gold loans, you have to pay interest only:

In a gold loan, you have to pay only interest every month. For example, if you took gold loan interest of 12% for an amount of 1 lakh rupees. You have to pay only 1000 rupees every month. At the time of releasing your gold, you can pay 1 lakh rupees in lumpsum.

VII. No charges for early closure:

Gold loan does not have any foreclosure charges, whereas in the case of a personal loan, the rate of foreclosure can get as high as 4% - 5%, which is high.

Conclusion:

It can be concluded that gold loans are cheaper, economical and easy to afford. In the case of a gold loan, you get flexible repayment options. You can either go for the EMI option or opt for bullet repayment in the case of a gold loan which rather makes it easier for lower-middle-class people to afford.