As gold is considered a precious metal for a middle-class family. They invest in gold as they can use this investment in their future. Many people go for gold loans. A gold loan is a process in which a borrower takes a loan from lenders by undertaking their gold ornaments. Whenever a person thinks of a loan, he or she always considers the benefits that will come up with the loan.
Gold Loan Per Gram is also getting popular day by day. Due to lack of time many people go for gold loans. With minimal documentation and with full security the loan gets sanctioned.
Advantages of gold loan
Fast processing
As they are the secured loan and it includes easy eligibility criteria. It also offers minimum document requirements. It does not require a credit score for approvals. so, the loan is sanctioned by lenders as soon as possible. People can apply for loans online or offline.
Lower interest rate
An unsecured loan is a property loan, education loan, car loan. interest rate while in the gold loan the interest rate is low. Further, the rate of interest will get lowered by adding another asset's collateral.
No processing fees.
Processing fees mean there would be no fees. Usually, lenders charge 1% of processing fees, not more than that.
Income proof not needed
When we go for the loans we usually have to show our income proof. So, that the lenders will be satisfied that a person can repay the loan amount but that is not in the case of a gold loan. We don't have to show our income proof. In the case of gold, the borrower is giving his or her gold as security. From this, we conclude that anyone can apply for a gold loan whether earning or not.
No credit score
In many loans, credit score plays a major role but not in gold loans. In other loans, a credit score is considered to see whether the person can repay the loan or not. In gold loans, the amount is decided by market value.
Documents needed
There is minimal need for documents.
Following are the documents needed.
Aadhar card/PAN card/Driving license.
Address proof.
KYC.
Passport size photograph.
Flexibility in repayment
The method of repayment is chosen by the borrower. Following are some of the method of repayment-:
EMI Method.
Upfront interest payment.
Bullet repayment.
Disadvantages of gold loan
LTV rate
When a person pledged his or her gold, he or she gets the loan amount. That loan amount is based on the Loan To Value ratio. so, this varies from one lender to another lender. The maximum value can be 80%. For example, if the market value of gold is 2 lakh then you will get 1 lakh as the loan amount.
Loan default
When you are not able to repay the loan amount then the lenders have the right to seize your gold.
CIBIL SCORE
As your credit score is not considered but your CIBIL score may get affected if you are not able to pay the loan amount. That's why you should repay your loan amount within the time limit that is given by the bank. If you repay your amount of time it will increase your credit score
Conclusion
From the above here we can conclude everything about Gold Loan. When a person goes for a gold loan he or she should go through the advantages and disadvantages. A gold loan can be a better option for a person seeking a loan. Gold is an investment for a middle-class family and the advantages that come with a gold loan can be a boon for everyone. So, every loan has its pros and cons.
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