Needless to say, there are certain benefits that individuals can reap from this kind of loan.
Recently, gold prices in India have sky-rocketed like never before. In the 2019 Budget, when the import duty on the yellow metal was increased to 12.5 per cent from the previous 10 per cent, common Indians have definitely received a jolt. This is because, we Indians are definitely ‘obsessed’ with gold.
Lending money against gold jewellery has a long history in the Indian culture. And many loan providers and NBFCs later on leveraged this factor, and began offering personal loans against gold. In fact, gold loans turn out to be of great value in times of crisis. Needless to say, there are certain benefits that individuals can reap from this kind of loan.
Benefits of gold loan comprise the following:
The foremost benefit of this kind of personal loan is that, processing happens in the fastest possible manner. As gold loans are backed by physical gold, bankers are often happy to give out the loan much easily. Its even safe for banks or financial institutions as, they have the option to sell of the physical gold in case of default. This is one reason why banks disburse such loans within a few hours.
Yet another benefit of gold loan happens to be its simpler repayment procedure. It’s a unique feature where the borrower to choose to repay the interest amount beforehand and the principal amount at a later stage or during the closure of the loan. This unique feature makes gold loan pretty much attractive to many.
The next benefit of gold loan is the interest factor. This kind of a personal loan offers lowered interest rates as they happen to be secured loans. On an average usual personal loans charge interest ranging anywhere between 15 per cent and 18 per cent. However, interest rates for a gold loan start from around 13 per cent, thus making it more affordable for the average Indian.
Since gold loans are given instantly in lieu of physical gold, most banks and NBFCs choose to waive off processing fees. This is all the more because, the physical gold is considered as a collateral, which the bank already keeps with itself for a certain duration.
If you want to avail a loan, usually banks or financial institutions check for a credit history. If your credit history is low, they often reject loans. However, in order to avail gold loans, no such thing is required. Since the person availing loan needs to deposit physical gold with the bank, the latter does not demand credit history.
Hence, on a final note, it can be said that, availing gold loans have quite a lot of benefits and can rescue you in times of dire situations. However, a thorough research is always recommended before opting for a gold loan.