You’ve suddenly realized that you need extra funds to furnish you newly purchased home or use extra funds to finance your own start – up. But while you may have exhausted all other financial options, there is always the gold loan you can opt for.
For most Indian’s this loan is one of the most viable options, for one reason. Indian cultural beliefs consider gold as one of the gifts that must be passed on from one generation to another. Even auspicious and special events call for the purchase of gold items and jewelry, which is then further passed on to their respective generations. In such cases, the gold itself can be used as a collateral, for a small amount of funds, whenever required.
So if you need any emergency funds, how can a gold loan work in your favor? Here is how:
Short processing time:
One of the main benefits of the gold loan is the short processing time. Since the gold loan comes under the category of secured loans, the provided collateral would be required to be verified. As compared to other secured loans, the gold collateral is easier to verify. Most gold lenders have been equipped with experts who have the experience and qualifications to verify the value of gold in a short period of time. Once the verification process is done, the lender will provide the appropriate loan value rate. Therefore, you need not wait for a long time for your loan to be verified.
Loan to value rate
Different lenders will have different values. However, as compared to other secured loans, the loan to value ratio for gold loan is considerably higher. For one, the range of gold loan values lays between 65 to 85 %. In addition to this, the value of the gold will also differ on several components, such as the current value of gold in the market, exclusion of making charges, the weight of the precious stones embedded in jewelry or even the hallmarked gold items.
Affordable interest rates
Interest rate for gold loans vary across banks and NBFCs. In most cases, the level of interest rate will depend on the tenor, the loan amount, LTV and of course the base lending rate. However, in order to compensate for the high risk associated with lending funds, the interest rate is normally charged at a level appropriate to the borrower’s profile. In most cases, the interest rate for gold loan lays between 9 to 11 %, which compared to other secured loans is considerably lower.
Tenure of a loan
The tenure of the loan primarily plays an important role in determining the EMI’s of the loan. Therefore, the longer the loan, the less EMI’s you will need to pay. However, at the same time, you will end up paying more of the interest rate. For a gold loan, the tenure is not more than a year, making it one of the most affordable loans for any individual.