Households across India store gold items worth about $1.5 trillion, as per the current market value of this yellow metal. This is the largest private collection of gold anywhere across the world. Apart from its sentimental values, the equity that these items hold can be a suitable option to raise funds during a monetary crisis.
Owing to the customer-centric perks of this financial product, it is an ideal credit option to choose in case of financial emergencies. Here individuals will get to understand why a loan against gold is a feasible option in such circumstances.
Top 7 reasons to select loan against gold for financial emergencies
Here are the reasons why gold loans are ideal for instant funds requirements:
- Quick disbursal
Since financial emergencies need immediate solutions, there are not many better credit instruments than gold loans in the market. One of the notable USPs of this financial product is its fast disbursal. Typically, borrowers can receive funds within a few hours of application.
Following their application, company representatives will contact them for further processing.
2. No restriction on usage
Gold loans do not have any restriction on their usage of funds. Here individuals can fund any monetary requirement that they deem fit. Hence, whether it is a medical emergency or need urgent funds to meet business expenses, this financial product can fulfil every requirement.
3. Minimal paperwork
A lengthy documentation process often delays the loan processing, which can be an issue facing a financial emergency. Compared to other forms of borrowings that extend similar features, credit against gold entails a minimal documentation process.
Usually, borrowers need to submit only their KYC documents and their income proof to service a loan. Resultantly, this reduces the processing time, which makes it easy to get a gold loan.
4. Lenient eligibility criteria
Besides a short documentation process, the easy to meet gold loan eligibility criteria also makes it a preferred credit option for financial emergencies. Any individual over the age of 21 in possession of gold items can apply for this loan. Individuals need not meet any credit score requirements like other financing options. However, they may need to meet the monthly income requirements if specified by a lender.
Nonetheless, maintaining a high credit score can help them secure a low interest gold loan and enjoy better repayment options. Owing to these lenient eligibility criteria, anyone can utilise the gold items at their disposal to source a credit to meet any monetary needs.
5. Substantial loan amount
As specified by the Reserve Bank of India, one gets up to 75% of the total value of gold articles as a loan. However, the upper limit of lending differs from one financier to another. For instance, one financial institution may have a gold loan limit of Rs.1 crore, while another may offer up to Rs.50 lakh as gold loans.
Therefore, prospective borrowers can take the assistance of online calculators to check and find the loan amount they are eligible for. Additionally, the purity of gold items also plays a part here. With gold articles of higher purity, i.e. 24 carats, one can avail a higher credit than 18 carats.
6. Affordable interest rates
Gold loans, being a secured credit instrument, levy a comparatively lower interest rate than others. Furthermore, borrowers can secure the best gold loan interest rate by ensuring the following –
- Meet the eligibility criteria
- Fulfil the monthly income requirement
- Submit gold items of higher quality, i.e., 18 to 24 carats
Since this rate alters from one lender to another, individuals can refer to lender websites to learn more. Also, they can use online calculators to know more about their total interest outgo and EMIs.
7. Repayment flexibility
Last but not least, repayment flexibility is another salient feature of this financial product. Even though it is not directly related to funding financial emergencies, it helps borrowers quickly pay off their debt. Leading financiers like Bajaj Finserv offers more than one repayment method; here are the details –
- One can repay in regular EMIs
- Borrowers can choose to pay the interest initially and then repay the principal amount at the end of a loan tenor
- Debtors can also choose to pay interest periodically, and the principal after a loan’s tenor
Also, there are part-prepayment and foreclosure facilities available with this credit instrument. This makes way for a hassle-free borrowing experience.
Apart from these pointers, a loan against gold from leading financiers comes with a doorstep facility. Here, executives from the lender visit the house of an applicant for gold appraisal and document verification. Once they are satisfied, they will initiate the loan disbursement process. This, in turn, reduces the hassle of visiting branches to apply for credit.
A loan against gold can play a pivotal role in meeting any financial difficulties owing to the benefits mentioned above. Nonetheless, individuals should know about the loan terms in detail to avoid future complications before applying for one.