Gold Loans are an excellent option to personal loans. This is because they are secured loans. (Secured against Gold). Your gold ornaments are a great security for the bank. You can easily borrow against gold and get money in a hurry.
Gold Loan is really simple. The lender evaluates the value of the gold article and checks the submitted documents. He then sanctions the loan amount as per the market value of the gold. You then pay off the principal amount along with the interest and get the pledged gold back.
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Gold loans are cheaper than personal loans. Personal loan interest is around 14-22% a year. Gold loan interest can be as low as 11-12% a year. So, availing gold loan is better than a personal loan. You can save a lot in interest if you borrow a large quantum of gold loan.
Take a gold loan instead of personal loan and save on interest. RBI has capped gold LTV (Loan-To-Value) ratio at 75%. This means you get 75% of the value of the pledged gold as a loan.
See Also: Gold Loan Interest Rates
Personal Loan is disbursed within 48 to 72 hours. The gold loan may be disbursed on the same day if you have all the documents in place. All you need is a gold asset to pledge. Any salaried, housewife or self-employed can get a gold loan.
Farmers can get a gold loan for agricultural activities and as low as 8%. Just show proof of the agriculture-related documents. Gold loans can be got quick-time with less paperwork. All you need is identity and income proof and some photographs.
Gold loans have lower processing fees than other loans and in some cases its zero. Personal loans, home loans and auto loans have higher processing fees.
Banks decline personal loans if credit score is bad. The same is with most loans like home, car and two-wheeler loans. You don’t require a good credit score when availing gold loan as gold is the collateral.
See Also: Best Gold Loan Interest Rates May 2019
You don’t require income proof when availing the gold loan. If you avail home loan, car or two wheeler loan from the bank, you must show proof of income. Not so with the gold loan. It’s almost impossible to get most loans without income proof. No such problem with the gold loan.
With a gold loan, you service only the interest each month. Let’s say you took a gold loan of Rs 1 Lakh with gold loan interest of 12%. You pay just Rs 1,000 each month and the lump sum of Rs 1 Lakh at the time you want to release the gold.
Gold loans offer flexible interest and principal repayment options as per convenience. Interest can be paid along with EMIs or even during loan closure. Some banks offer bullet repayment options where you pay only interest and loan principal at the end of loan tenure.
See Also: Need for a Gold Loan
The gold loan does not have foreclosure charges. Personal loans could charge as high as 4% of the outstanding amount on an early closure of the gold loan.
Your gold lies safe with the lender. (This is a bank or NBFC). The onus is on the lender to protect the gold. All you must care about is repaying the gold loan and getting the gold back. The gold is stored in a vault and guarded 24*7. Lenders even insure the gold pledged with them against robbery.
Finally, gold lenders love sanctioning gold loans. The gold ornaments belong to the women of the household. Family members motivate the husband (He is generally the one who pledges gold) to get it released as soon as possible. So, the lender faces low risk and this is why NBFCs insist only on gold ornaments.
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