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India is one of the world's largest gold importers. Gold is regarded as having significant value and a possible source of future financial appreciation. However, few people know that gold can also be used to meet short-term cash needs. Gold loans are now available in various banks and non-banking financial organizations (NBFCs). When you need immediate cash, these loans might come in helpful and can be obtained in a hassle-free manner.
Here are a few reasons why you should take a loan against gold.
1.Minimal Processing Time and Fee
A gold loan is a secured loan with a very short disbursement period. The money is usually credited to the borrower's account within 24 to 48 hours.
Processing fees for loans against gold are as low as nil, while some lenders charge 0.10 percent to 1% of the loan amount.
2.No-income Proof to be Provided
In most loans against gold, gold loan companies don't ask for income proof from borrowers since the loan is secured against the gold pledged by the borrower.
3.'Pay Interest Only' Option
Loans against gold frequently have a one-of-a-kind policy that allows the borrower to pay only the interest component while repaying the loan.
The primary component might be paid at the end of the loan term or during the loan closing process to gold loan companies.
4.Interest Rates
The interest rate is lower because gold loans are secured loans, starting at 9.90 percent.
The bank lowers the interest on the gold loan for applicants who can supply additional collateral.
For a borrower, this means that taking out a gold loan is less expensive than taking out a personal loan. Even if they are built for the same amount of money, repaying gold loans is easier than repaying personal loans owing to the interest on gold loans.
Gold rates are at an all-time high, and experts think they will rise even more. As such, this makes a perfect time to apply for a loan as the gold loan per gram rate will be at a high.
5.Minimal Foreclosure Fees
Some banks and lenders don't charge prepayment fees on the gold loan per gram rate. Or if they do, they charge them at a low rate of 1%.
6.Poor Credit History is not an issue
The bank determines the loan amount based on the borrower's repayment abilities and credit history in most loans. This is not the case in loans with gold as collateral, though.
Since gold is used, lenders are confident in the repayment of the principal component and do not base their decision on the borrower's credit history. An applicant can get a gold loan even if they cannot make payments on their previous debts or repay a financial obligation.
7.Physical Gold Security
It is the lender's responsibility to keep the physical gold safe. Borrowers do not have to worry about it because it is generally kept safe in the bank's vault. The bank returns the gold once the principal amount and interest of the gold loan are repaid.
Conclusion
Loans with gold as collateral are simple to obtain. However, borrowers must ensure that they repay the principal amount and the interest on the gold loan on time, or the gold may be forfeited to the bank.