There’s no feeling like being debt-free but maintaining that status requires a deep grasp of both finances and effective money management. Regardless of how well their finances are managed, Indians have a specific item set aside for unexpected circumstances requiring cash – gold. India is one of the world’s major consumers of gold. In the event of a fiscal crisis, gold can also be utilised to get a loan. Getting a gold loan is probably one of the simplest and quickest ways to get cash when you need it.
A loan against gold is a debt instrument obtained from a lender in exchange for the precious metal. Lenders will usually provide you with a loan based on a percentage of the gold’s worth. The final purpose of a gold loan is not constrained, unlike the single objective of other secured loans like a home loan or education loan.
Here are some reasons why gold loans are becoming a popular go-to option in case of need.
Eligibility criteria simplified
The procedure for obtaining a gold loan is pretty straightforward. Anybody over the age of 18 years old may obtain the loan without the requirement for a borrowing history or a CIBIL score. Loans are made against gold held as collateral, and people from all backgrounds of life can qualify for the loan.
Interest rates
The interest rates on gold loans may be cheaper than those on other secured loans. A reduced interest rate as low as 8.5% per annum may appeal to borrowers in the event of a financial crisis.
Good loan-to-value ratio
Obtaining a large sum of money at the very last minute is difficult. Using idle gold to raise cash is undeniably easier as they also have a high loan-to-value ratio (LTV) of up to 75 percent as per the RBI mandate.
Quick processing and timely payout
The introduction of new digital technology has greatly reduced the time it takes to obtain digital gold loans. Many fintech businesses use a quick processing mechanism to onboard consumers and give borrowers a smooth experience.
Ease of repayment
One of the primary benefits of a gold loan is the freedom with which it may be repaid. Gold loans include various repayment choices, allowing borrowers to simply pay the interest initially and the entire amount at the conclusion of the loan term. Banks and gold loan providers usually do not levy default penalties, making gold loans even more appealing.
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