You never know when trouble comes knocking at your door. In times of crisis, you need money in a hurry and don’t know where to go looking for it. This is when you look towards a financial product, which can give you money in an emergency…The humble loan. Loans are of different types with one common feature…All loans charge you interest. You definitely want a loan which charges you a lower rate of interest.
You are walking past your bank and you see a big banner. “Need money for an emergency? Avail a personal loan in 24 hours.” You have only one daughter and her marriage has been fixed. You need money to make her wedding a grand event. Problem solved…Walk into the bank and avail a personal loan. This is when you get a shock…The bank is willing to offer you a personal loan, but wants you to pay an interest of 18% a year. You quickly rush out of the bank…18% a year for the loan…This is too much. You need the money badly. Is there a way out of this mess? This is when your friend shows you the way out of your troubles. He says…Why not go for a gold loan?
Gold coins and gold ornaments lying idle, locked up in your cupboard, can be pledged with a bank or an NBFC to get you money in an emergency. Up to 75% of the market value of the gold, is given by banks against this pledged gold. Banks are very happy to lend money to you against the gold and charge a lower rate of interest, than say a personal loan. If you avail a gold loan from the bank, you have to repay this loan within 2 to 3 years, through EMI’s. Banks could charge you an interest rate of around 12% to 14% a year, on the gold loan.
Yes, the personal loan commonly called an emergency loan, would be sanctioned in less than 24 hours, but at a high rate of interest. The bank does not ask you for any collateral on the personal loan and for this benefit it charges you a higher rate of interest. Your daughter’s marriage is a few weeks away. Why do you need money in such a hurry? You can wait for 2 days, for the gold loan to get sanctioned. Personal loan can charge you an interest as high as 18% to 22% a year. You have to pay only around 12% to 14% interest a year, on your gold loan. You would gladly wait for a couple of days to get your gold loan sanctioned, if you are charged a lower interest rate on your loan. Banks are happy to lend against your gold, as if you do not repay the borrowed money, they will simple auction the gold and recover their dues. You also do not require a guarantor if you avail a gold loan. Asking your relatives to stand guarantor for your loan, is a headache and an unnecessary obligation. If you avail a personal loan, the bank would ask you for a guarantor. Know this….Banks do not check your cibil score, before sanctioning your gold loan. They are happy with the gold offered as collateral. If you avail a personal loan, the bank sanctions your loan only if you have a good cibil score. First time borrower…no problem…Go ahead and apply for a gold loan. Your daughter’s marriage is going to cost you a lot of money. You do not want to be paying too much interest on the loan you have taken. What better than a gold loan?
Heard this saying “Whoever said money can’t buy happiness, simply didn’t know where to shop”. The problem is, you shop using your credit card. A credit card charges you interest as high as 24% to 36% a year, on your pending dues. You have been swiping …swiping…swiping. Now you are in serious debt. You cannot pay back the money you have borrowed, using your credit card. Worse, you are paying an interest rate of 30% a year, on this credit card. What to do?
You have gold ornaments lying idle in your cupboard? Simply avail a gold loan against these gold ornaments. With the money you get, pay off your credit card dues. A gold loan could charge you an interest of around 12% to 14% a year. This is definitely better than paying an interest of 30% a year, on your credit card dues.
Loan against property, charges you an interest rate similar to a gold loan. You have to pledge your home and avail a loan against property. You need to be absolutely sure, you can repay the loan against property; otherwise there is a chance you could lose your home. The bank would auction your home to collect its dues. Sure…you could lose your gold, if you are unable to repay your gold loan. But isn’t it better to lose your gold, rather than your home?
It takes a long time for banks to sanction a loan against property. The bank has to check the market value of your property and go through the legal documents like title deed, sale deed, encumbrance certificate and so on. Gold loan could be sanctioned much faster. Banks would also check your income and cibil score, before sanctioning loan against property. Banks don’t want the headache of having to auction your property, if you default on the loan against property. Banks are not too concerned with your income, when you avail a gold loan.
Are you looking for any kind of loan? The team of wealth doctors at IndianMoney.com is always there to help and guide you. You can explore this unique Free Advisory Service just by giving a missed call on 022 6181 6111. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
Subscribe to our Youtube Channel