Gold loan is one of the quickest and instant loan types available in the market. Whether you need it for medical emergencies, financial emergencies, marriage, education, investing in a business or something else, you can make use of the funds available from the gold loan. So, instead of keeping your gold assets locked inside your locker or in the bank, you can make use of it by availing a gold loan.
What is Gold Loan?
Gold loan is a credit that is provided against the collateral of gold items like jewellery, coins, etc. Both banks and NBFCs offer such loans. The gold items taken as collateral is returned to the borrower when the total loan is repaid along with interest. It generally comes under the short or medium tenure loans, and the gold loan rates are relatively low as well. One the key reason because of which gold loan is preferred over other loan types is its quick processing and disbursal without the long wait of paperwork and other formalities. Also, the current gold rate shows a favorable response to the gold loan market.
There are innumerable benefits of availing a Gold loan. The aspects like quick and hassle-free processing, the safety of collateral and no hidden charges are the top aspects of Gold Loan.
Following are the reasons why you should consider availing gold loan over other loan types:
1. The gold loan has minimal documentation. Your Identity and Address proof is likely to be the only document required.
2. No credit history or credit score required.
3. Fast disbursement, i.e., the loan is disbursed within 1-2 days of application. Sometimes it is just a few hours.
4. The rate of interest on gold loans is lower than many other loan types.
5. The tenure of a gold loan is flexible, and it ranges between 6 months to 3 years.
6. The minimum loan amount starts with Rs. 1500 and can go up to Rs. 1 crore.
7. No prepayment charges or penalty on Gold loan.
8. The gold assets you use for collateral are kept safe and are returned after the complete repayment of the loan.
Since gold loan provide a lot of flexibility, which is highly appreciated about the gold loan and is also the reason for its popularity.
However, understanding the minimum eligibility criteria is crucial before you go and apply for the loan. For availing the gold loan, you don't need any employment experience or regular income source to meet the eligibility criteria of a gold loan. If you are above 18 years and own gold, then that's all you need to avail a gold loan. The amount of loan depends upon the value of the gold given as collateral. Thus, to reframe, all you need to avail gold loan are:
- You must be 18 years or more.
- You own gold.
The documentation aspect of the gold loan is relatively easy and requires minimal effort. Unlike other loans where various documents relating to identity, address, income and other details are needed; in the case of a gold loan, all you need is KYC documents. Thus, while applying for a gold loan, you will need the following documents:
- Identity proof such as Aadhaar card or voter card or driving license or passport, etc.
- Address proof such as electricity bill or telephone bill, etc.
- 2 Passport size photographs.
Now, even though availing a gold loan is a straightforward and quick solution to your financial needs, it does not mean it is also the right choice to opt for it as and whenever you like. This caution is necessary because you also need to repay the borrowed sum along with interest and that will need you to plan and design your personal budget in advance.. Besides, if you default on a gold loan the lender has the right to confiscate your gold to cover up the loss; thus, there is a risk of losing your asset if you fail in repayment of the loan. Therefore, follow these tips while availing gold loan:
- Add-on Charges: Just like other loans, there can be some add-on charges like processing fee, documentation fee or metal valuation charges in the gold loan as well. Thus, make sure you are well aware of all the costs before availing the loan.
- Interest Rate: Various banks and NBFCs provide the gold loan. Thus it's only prudent to compare the interest rates of various lenders before applying for the loan. Needless to say that you need to opt for the lender that is offering the lowest gold loan rates.
- Security: The safety and security of the asset are incredibly crucial. You can always check the security measures taken by the lender for keeping the gold safely.
Based on the above discussion, opt for the gold loan when you need the funds for some genuine reason. Also, the option of gold loan is much better in most cases than any other loan type.