Almost every business requires finance. Even the firms that work for social welfare need funds in the form of charity or donations. Monetary problems are a part of running a business. Credit facilities provide finance to various firms every day. Credit is the backbone of many enterprises. The new, as well as the old companies, require credit finances or else they won't be able to function properly. Making money by providing money is the way of financial institutions. These firms provide credit to the public and charge a certain rate of interest as repayment for this service.
In the age of the modern credit system, a gold loan is one of the best options available for raising money quickly. A gold loan is provided by plenty of financial institutions at a different rate of interest. The value-to-loan ratio also differs, some offer as low as 70% of the total value whereas some financial institutions offer up to 90% of the total value. The processing fee while applying for a gold loan is also low and in respect to a certain percentage of the actual loan amount. The tenure period also varies from company to company. The quality of your gold, the best being ‘24-carat’ will decide your gold loan per gram value.
Some other important factors regarding the gold loan procedure are as follows:
Credit score does not affect gold loan applicability. Since gold loans are secured there is no role of the income proof as well.
Gold loans can be received within a short period. The minimum time it would take to get a gold loan is around one hour.
If you fail to make the repayment of the loan in time, the bank will issue a personal and a public warning. After that, if the payment is still not received, the lender has the right to sell the collateral security at an auction to reclaim their loss.
For example, the Central Bank of India gold loan policy offers an amount of up to Rs. 10,000,000 at a rate per gram of Rs. 5121 and a loan-to-value ratio of 90% on gold market price. The interest rate offered is 7.0%, with a processing fee of 1% of the loan amount. The tenure period offered is from 6-months to 12-months.
Kinds of business that could benefit from gold loans:
Start-up firms:-
New firms can find it somewhat difficult to raise finances as these are new to the market and have no goodwill at all. Numerous start-up enterprises fail before they even make it into the competition simply because they run out of the fund. Though it is risky to lend money to such firms, a gold loan does not pose any risk for the lender and therefore there would be no need to prove your repayment capabilities. A gold loan would be a great method of raising money fora start-up business enterprise.
Personal or family business:-
Just like start-up firms, the entrepreneurs of India who operate their own private or family businesses may find it somewhat difficult to receive loans. Since there is little security in lending to a small business owner, lenders hesitate to provide loans to these people. Therefore, applying for a gold loan is yet again one of the best courses of action for raising finances.
Agriculture:-
Farmers are the source of our daily bread and butter but still, most farmers are poor. A gold loan for agriculture purposes might not be the best option for a farmer but if there is no other way to raise funds, then it is advisable to opt for a gold loan.
Conclusion- Gold loans are a reliable source of credit. People who aspire to uplift their business should consider gold loans before any other sort of loan.
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