Loan Against Gold Benefits That No One Tell You About
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Loan Against Gold
To fulfil their financial needs, many people opt for loans provided by financial institutions or lenders. A Personal Loan is amongst the most common loan options when it comes to miscellaneous needs; but if you’re looking for some financial assistance for a loan to attain money, we’d recommend that you consider Gold Loans too. It is estimated that Indian households collectively own up to 25,000 tonnes of gold.
Gold Loan Benefits
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While personal loans have no collateral placed with the lender, in case of gold finance, your gold ornaments are placed as collateral. Hence, a gold loan is secure while a personal loan is not. Some significant advantages of gold loans are given below:
Higher Principal Amount:
Your monthly salary affects your eligibility to attain a personal loan if you apply for one. That makes it difficult for someone with a low income to get loans of high amount. But in case of loans against gold, the amount (Loan to Value) can go as high as 75 per cent of the value of the gold that you place for collateral. Therefore, as long as you provide enough collateral, you can take any amount as collateral, irrespective of your income.
No Processing Fee:
A lot of checking is required in case of personal and other kinds of loans. Lenders inspect your financial status and income proof. Lenders generally charge a processing fee to undertake this inspection. It varies from 0.5 to 2 per cent of the total loan amount that you apply for. For Gold Loans, there is no need for income proof as the loan is solely based on the quality and quantity of the collateral. Hence, many lenders do not charge any processing fees.
Disbursement is Quicker:
Because a Personal Loan has no security put with the lender, the procedure includes carefully looking over the credit risk and the loan applicant’s finances before agreeing to accept the request. This process takes a lot of time. On the other hand, a Gold Loan is dependent on the gold you provide as insurance. A Gold Loan takes hardly any time. You hand over the gold wait for its worth to be decided, fill out a couple of forms, and walk away with the approved loan.
Interest Rates are Lower:
The interest rates for gold vary with each lender and are dependent on the amount of time you wish to take the loan. But mostly, interest rates for Loans against gold are lower than those for Personal Loan. You can also take Gold Loans for as low as one month. This option is not available in case of other loans.
Zero Prepayment Charges:
Personal loans are repaid through EMIs, which cover a period. When you plan to pre-pay any amount of the loan at any time, you will be subject to a prepayment charge which could be around 2 per cent of the outstanding amount of the principal. But in the case of Gold Loans, you can repay any amount at any time and even close the loan account whenever you wish, without any prepayment fee paid.
Conclusion
Gold Loans can, therefore, be a fantastic alternative giving you the same ability to raise funds for your personal use, while costing you less.
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