Several banks and lenders across India offer gold loans to their clients at impressive rates of interest. This means that without selling your gold, you can fulfill your needs for funds and at the same time manage your savings. But prior to applying for a gold loan, a person should know how to go about the process of getting gold, etc.
Let us first look at the advantages that Gold Loans offer to people :-
Quicker processing :- Gold loans come under secured loans and therefore contain lenient eligibility criteria and most minor documentation. It does not even need a credit score for loan permissions. And thus, lenders naturally disburse the loan in only a few hours. People competent for an online gold loan can even get the loan payment in just a few minutes.
Lower interest rate :- Compared to unsecured loans such as personal loans, home loans, car loans, etc., gold loans that are secured loans demand a lower interest rate. Also, if you deposit another asset as collateral for security, the gold loan interest rate can be reduced further. In addition, if you tend to have good relations with the bank or lender you wish to avail loan from, you might get a better option in terms of rates of interest. You should make sure that you know the prices of gold as you get the gold loan based on the Gold Loan Per Gram.
The credit score is not required :- Unlike many other loans, gold loan approval does not require your credit score. In any other loans, the loan amount is sanctioned based on the borrower’s repayment capacity and credit score. Still, in the case of a gold loan, the loan amount is given based on the market value of gold as it is deposited as collateral.
No processing charges :- Some banks and lenders don’t impose any processing charges, while some banks and lenders might charge up to 1%-2%. In contrast, others might charge a fixed percentage of the total amount of the loan or charge a processing fee. Others may charge a fixed amount of processing from the loan availing amount. These are a few of the benefits of a gold loan, making borrowers avail of a gold loan over other loans and still manage their savings.
Now, let us discuss a few loopholes in Gold Loans as below :-
Loan-to-Value Ratio :- In the gold loan process, you receive a specific percentage of the market price of the gold that you pledge as collateral with the bank or lender. The loan amount is agreed upon based on the RBI’s LTV (Loan to Value) ratio. This ratio varies from different banks and lenders and rises to a maximum of 80% of the total value of the gold that is pledged, as was decided by the RBI. But recently, RBI increased this percentage up to 90% of the total value of gold pledged. Due to default in repayment of the loan amount, you might lose your pledged gold. In case of gold loan repayment failure, lenders have the right to freeze your gold ornaments and jewelry and auction it to get back their money, that is, the gold loan amount.
Several banks willingly assist you regarding the best loan amount you can get in exchange for the gold you pledge, and for this, you might check the Gold Loan In SBI so that you know that you are getting the best amount of money for this gold as security. This leads to you fulfilling your requirements without touching your savings.
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