Last Update: February 22, 2023, 08:23 IST
5 Reasons Why Gold May Be Your Favorite Option in a Cash Crunch
Loan Against Gold is a debt instrument obtained from a lender against the precious metal
There’s no feeling like being debt-free, but maintaining that state requires a deep understanding of both finance and effective money management. Irrespective of how well their finances are managed, Indians always have one specific commodity set aside for unforeseen situations requiring cash – gold. India One of the world’s major consumers of gold. Gold can also be used to avail loans in case of financial crisis. Getting a gold loan is probably the easiest and quickest way to get cash when you need it.
Loan against gold is a debt instrument availed from the lender against the precious metal. Lenders will usually offer you a loan based on a percentage of the value of the gold. Unlike the single objective of other secured loans like home loan or education loan, the end objective of the gold loan is not constrained.
Here are some of the reasons why gold loan is fast becoming a popular preferred option when the need arises.
Eligibility Criteria Simplified
The process of availing a gold loan is very straightforward. Anyone above the age of 18 years can avail the loan without the need for credit history or CIBIL score. The loan is given against gold held as collateral, and people from all walks of life can qualify for the loan.
Rate of interest
The interest rates on gold loan can be cheaper as compared to other secured loans. The low interest rate of 8.5% per annum may appeal to borrowers in times of financial crunch.
good loan-to-value ratio
It is difficult to get a big amount at the last moment. Using passive gold to raise cash is undeniably easier as they have a high loan-to-value ratio (LTV) of up to 75 per cent, as mandated by the RBI.
Quick processing and timely payment
The introduction of new digital technology has reduced the time taken to avail the digital gold loan by a lot. Many fintech businesses use a speedy processing mechanism to onboard consumers and provide a seamless experience to borrowers.
ease of repayment
One of the primary advantages of a gold loan is the freedom with which it can be repaid. Gold loans include various repayment options, allowing borrowers to pay only the interest initially and the entire amount at the conclusion of the loan tenure. Banks and gold loan providers usually do not levy default penalties, which makes gold loans even more attractive.
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