Is a borrower’s Credit Report checked before Approving a Gold Loan?
Loans are typically classed as secured or unsecured, meaning they have or do not have collateral. A gold loan is secured, which means collateral in the form of gold is required. The gold can be in any form, necklaces, bangles, earrings, coins, bars, rings, chains, bracelets, or any other valid form. Banks and NBFCs, upon receiving the asset(gold), sanction money based on its value. The principal amount is disbursed within several hours of the application’s approval. The loan amount must be paid back to the lender with interest by the end of the loan term. Therefore, maintaining a healthy relationship with the bank or Non-Banking Financial Company (NBFC) is extremely necessary and paying the interest rate on time is even more critical.
Credit Information Bureau (India) Limited (CIBIL) is a credit company that maintains a report on individuals, companies, corporations, societies, trustees or any other banking customers. The report consists of the customer’s personal information, employment information, banking information and mainly the past credit details, i.e. the loans or debt acquired from any and all bank or NBFC. The report is summarized by a three-digit number called credit or CIBIL score that is highly crucial for receiving most loans like personal loans, business loans, car loans, home loans, etc... The bank or NBFC looks over the report before approving the said loans, but the score and the report are unnecessary for a gold loan. As a gold loan is secured and the gold asset remains with the lender, they trust gold loans more and so don’t look over the report. Banks and NBFCs grant loans only based on age, ID proof, and the applicant’s collateral before approving the loan. For example, farmers applying for an agricultural gold loan needs a farming land document in the applicant’s name to avail the benefits of the loan. But, other than those mentioned above, the bank or NBFC doesn’t look over a credit report, income proof, or employment proof usually needed to avail of most other loans.
Benefits of a gold loan Due to the minimal documentation requirement, the bank or NBFC processes the document rapidly and disburses the amount quickly. So, opting for a gold loan is best for emergency purposes as the amount is handed to you very soon. Banks and NBFCs also offer both online and offline services. By going online, you can fill the application form from anywhere in the world. These days, they offer home pick-ups, where the bank or NBFC collects the collateral at your doorstep. The offline mode is also as easy as online mode, and in a half day, you can have the loan in your name. Also, gold loans are multi-purpose loans, unlike other secured loans like business loans, marriage loans, and medicinal loans. You can use the money only for business, marriage, and hospital bills, respectively.
Gold loans can be used for any reasons like business, vacation, marriage, construction, medical emergency, or other financial crisis. Most other loans have fixed values as their loan amount or have a low LTV ratio, but a gold loan has the maximum LTV ratio of 90%. LTV ratio is the loan to value ratio, and 90% of it means the bank or NBFC may grant a maximum of 90% of the gold’s value as the loan amount. This is because the value depends solely on the gold. So, if the asset is of more purity and weight, the loan amount is accordingly high. Also, gold loans have the lowest interest rates. The gold loan rate starts at 7% per annum compared to other loans which have a minimum interest rate of 8%-9% per annum. Therefore, choosing a gold loan is always beneficial. You can check the Gold Rate Today before applying for a loan.
Conclusion:
Manappuram Gold Loan rate begins from 7% per annum. The financial institute grants upto 90% of the gold’s value to a maximum of Rs1.5 crore. The NBFC has innumerable customers, most of which are gold loan borrowers. It is highly reliable and has incredible ratings on customer service.
