Investing in gold is secure, but the rate of returns is not great, unlike other options. However, the gold finance market is rapidly growing in modern India. Almost every family has its fair share of gold reserves, primarily as ornaments or coins. Someone might find it difficult to sell gold due to the emotional value attached to the jewelry. Availing a gold loan per gram is a good alternative when in a dire financial situation.
A gold loan is availed after depositing a certain amount of gold with the lender. A maximum of 90% of the gold value is given as a loan as per the current RBI policy. This article discusses ten benefits of choosing a gold loan per gram over other alternatives.
1. Simple application process
The process of applying for a gold loan is pretty simple and straightforward. You don’t have to go through a lengthy documentation process like conventional loans. Make sure you reach out to a reputed and trustworthy NBFC instead of a traditional jeweller. All you need are KYC documentation (ID proof and address proof), a PAN card, and the gold to fill up the application form of the financial institution.
2. Quick disbursal
The disbursal process of the gold loan is also faster. When you take the gold and required documents to the lender, a designated valuer estimates the cost of the gold. The lender will then offer you about 70 to 75% of the gold value as the loan amount. The gold loan amount is given as cash or transferred to the bank account depending on the lender’s policy and customers’ convenience.
3. High-value loan (High LTV ratio)
Gold loans are famous for having a high loan to value (LTV) ratio. The fact that gold prices steadily increase with time makes giving out high loan-to-value ratio loans a low-risk commitment for the lender. Recently, RBI increased the maximum LTV value of the gold loan from 75% to 90%.
4. Available for low credit applicant:
A person with a low credit score can avail the gold loans easily and without any worry. The gold mortgaged by the applicant already secures the loan amount; hence the risk factor for the lender is significantly less.
5. Flexible usage
The gold loan amount is not secured for a particular transaction like other conventional loans. Hence, the loan amount can be used in any way the applicant sees fit. Gold loans are also perfect for starting a business as business loans have a higher interest rate than gold loan rates.
6. Flexible repayment
Gold loans’ most significant strength is flexible repayment. You can opt not to pay the EMIs and pay the entire amount according to your financial position. One can even opt to pay interest rates per month and pay the principal amount at the end. You may also opt to pay the entire amount at once before the end of repayment tenure.
7. Extended repayment tenure
Gold loans come with a clause for extension of repayment tenure. This gives even more flexibility to plan the repayment after dealing with the emergency on hand. Although, the loans should be paid off to avoid paying high-interest rates.
Mortgaged gold is kept safely in the vaults of the financial institution. Some lenders even opt to insure the gold in case of a robbery. Hence, the gold is more safe sitting idly in the safe.
9. Enhancing credit score
Gold loans can also enhance your credit score as you can get the loan without having a good credit score. Companies take repayment of gold loans when evaluating credit scores.
10. Minimal charge
Gold loans have meager processing fee charges compared to their counterparts. Moreover, there are no hidden costs and foreclosure charges of the loan.
Gold is too valuable of an asset to be kept in the safe of the house. The current system of gold loans per gram can be used to one’s advantage. A person who uses his options wisely will have a substantial financial advantage over his peers