Gold Loan is considered to be a secured loan in which a borrower agrees to keep his/her gold as security with bank/NBFC against the money approved by banks and NBFCs to the person based on the quality of the gold that the borrower owns. While banks can offer up to 85% of the gold pledged, NBFCs can only offer up to 60 %. Gold ornaments, coins are the most commonly accepted form of gold by the bank, and it should be of purity of 18-24 carats.
Advantages Of Gold Loan
As compared with a personal loan, the gold loan requires only some paperwork. Another reason is the gold loan interest rate charged for gold loan is much lesser when compared to a personal loan. For a Gold loan, there isn’t any need to have a good credit score or a good background of the borrower because the Gold loan is given based on the gold that he has with him. Hence Gold investment is commonly promoted by banks and NBFCs.
Interest Rate On Gold Loan – Bank Vs. NBFC
If we question any experts regarding the choice amongst personal loans and gold loans, then their answers would be a gold loan because money wise it is a better option. The interest rate charged by banks is around 14%-15% against the gold loan, whereas NBFCs charge 24%. As the borrower provides security, the interest rate of the gold loan is comparatively lower than a personal loan. Identity proof, PAN card, address proof, etc. are certain documents that are required for the documentation to apply to the gold loan. Even though the gold loan is more comfortable to take, we might feel it expensive at some point in time.
‘Bullet Repayment’ Option On Gold Loan
If a person wants to borrow a considerable sum of money, then they can opt for a personal loan than a gold loan. Otherwise, it’s advisable to go for a gold loan so that they can make use of the gold, which is left in lockers without any use instead of expensive personal loans. This will help them to save locker rent. So everyone will try to take back the gold by paying the mortgage. Gold is considered as an essential asset by all Indians as they contain the emotions and feelings of many people. To reduce the load of the borrowers, the banks and NBFCs give them an option called “bullet repayment,” where the borrower has to pay only the interest during the loan period, and at the end of the loan period the can pay back the principal amount.
Alternates Of Gold Loan
As mentioned early gold means a lot to Indians, it is advised to take a gold loan from co-operative banks or public sector banks as a measure of safety since there have been cases reported where the lender closed down without giving back the gold or placing fake gold for returns. So you’ll be stress-free and comfortable if your gold is in the right hands. So go for worthy and reliable lending institutions. Not only that, you should not make any fail in the payments of regular interest or principal and interest, if done so then the lending institution will melt the gold and sell it to recover the outstanding money. So go for a gold loan if you are sure about the repayment. If the loan amount to be taken is a huge sum, then loan against property is the better and best option.