What Makes Gold Loan A Good Funding Option In India
Gold is an integral part of most wedding or other auspicious occasions in India. For centuries, gold has been accumulated as means of financial security in Indian households, meant to be liquidated and used in times of financial trouble.
However, over the years, gold has moved away from being a latent asset in a locker. It has now emerged as a more valuable asset as there are options to monetize and use gold to fund needs without having to sell it.
One of these options is a gold loan, which is a secured form of credit obtained by a borrower from a bank or non-banking financial institution by pledging their gold to the lender as a collateral. The lender temporarily holds the gold jewellery and uses it as collateral to secure the loan. After the borrower has paid back the borrowed money, the jewellery is returned to them.
The assurance that the gold will be returned on repayment of the loan also makes it an attractive option for borrowers who do not want to permanently part with their gold jewellery. It can be retrieved as and when needed as per the terms and conditions of the gold loan. It also keeps intact the sentimental attachment to gold that may have been gifted by a loved one or have a fond memory linked with it.
A gold loan is one of the easiest and fastest ways to secure a loan for any short-term need. It usually requires minimal documentation and has a shorter tenure ranging from six to twenty-four months.
Why Is Gold A Good Funding Option?
Quick and Easy Process:
As it is a secured form of credit, a gold loan is quick and easy to avail requiring minimal documentation. Obtaining gold loans are an easy option for those who have no history of credit because very little supporting documentation is needed. All they require is the documentation for proof of identification and address, such as a PAN card or an Aadhaar card.
No Credit History Needed:
As long as the purity of gold has been assessed, the borrower’s credit history is not required. A borrower can avail a gold loan even with a poor credit history and a low CIBIL score. When disbursing a loan, gold lending firms do not take into account a potential borrower's previous debts because they already have gold jewellery as collateral, which might be lost if the borrower does not pay back the principal and loan amount on time.
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Helps Monetise Idle Gold Jewellery:
Physical gold as a latent asset in a locker or at home does not generate any interest income. So, a gold loan is a good option for individuals and families to monetise their gold and use it to meet their short-term needs or in case of an emergency.
Flexibility Of Ticket Size:
Depending on the gold ornament, the size of the loan can also be small amount and not always a huge sum to suit even small requirements. Some lenders provide loans starting at just Rs 3,000, making them suitable for short-term needs. However, one may also raise a gold loan of significant value worth multiple crores if the value of the gold asset allows it.
Multiple Options For Repayment:
Gold loans are easy to repay as lenders give borrowers more options for how often they want to make payments: monthly, bimonthly, quarterly, semi- annually, or annually. In addition, unlike the majority of other loans, gold loans offer a repayment option in which only interest must be paid and no EMI is required. At the end of the loan term, the principal may be repaid.
Easy Digital Gold Loans:
A borrower can easily apply for a gold loan online and submit their name and address and documents such as Aadhaar Card or passport for identity and address proof along with bank account details. One does not even need to visit the lender’s branch, instead, an executive will visit their homes to assess the gold jewellery. Once this assessment is done, the loan will be disbursed directly to the bank account provided by the borrower.
Conclusion
Gold loans have emerged as a popular form of credit due to the ease of getting such short-term loans on attractive terms. Their requirement for minimal documentation and the quick process time makes it the most attractive personal credit option.
However, there is also a large unregulated gold loan industry which includes neighbourhood lenders and pawn shops. Therefore, one must be careful and avoid local moneylenders for a gold loan and choose a trustworthy and branded lender like IIFL Finance.
In addition to providing the best value for the gold, IIFL Finance makes the loan application procedure simple and fast because of its customer-focused approach. Customers can also fill out an online application on the IIFL Finance website for instant approval of their gold loan and after verification, the agreed amount will be disbursed within hours.
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Apply NowDisclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.
