Kartnataka
  • May 19, 2023
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How Can a Loan Against Gold Help You?

Gold Loan

Loans are one of the most common and beneficial financial tools that are used by many to come out of a financial crisis. Loans against gold are one such type of loan that is gaining popularity due to its many added benefits. Gold is traditionally one of the most common investment options in India. However, apart from being an attractive investment option, the yellow metal can also help you get a loan at times of need. One can get a loan against gold from a financial institution that specializes in loans against gold.

Availing of a monetary loan in lieu of putting gold ornaments as collateral with the lender is one of the simplest and quickest ways to gather funds in times of urgent need. Read on to know more about the popular type of loan.

Eligibility Criteria

A loan against gold is one of the quickest and easiest ways to get access to finances. But to avail of a loan against gold, one must meet certain standard eligibility criteria that most Financial Institutions follow:

Age

The age limit of the borrower must be above 21 years.

Profession

Self-employed and salaried persons are eligible for loans against gold. The same holds true for entrepreneurs, homemakers, and pension holders.

Quality of the Gold

The quality of the gold kept as a security with the lender must be 22 karats. Most lenders take gold jewellery only as security and many do not take Gold coins as security.

Benefits of a Loan against Gold

One can avail of a loan against gold if they are looking for funds to tackle a short-term liquidity crisis. Some of the key benefits of a loan against gold include:

Quick Disbursement

One of the biggest benefits of opting for a loan against gold is its quick disbursement. Since gold loans are secured loans where the borrower puts gold as collateral, the lenders are also able to provide loans much more easily and quickly. Adding to it, most financial institutions usually disburse gold loans within a matter of few minutes, which adds a lot of convenience to the borrowers.

Low-Interest Rates

Loans against gold attract a majority of borrowers due to their low-interest rates. Compared to other types of loans, like personal loans, the interest rates charged on loans against gold are lower. Since the loan is secured by gold, the risk to the lender is lower and hence they offer lower interest rates to the borrowers.

Flexible Repayments

Another big advantage of loans against gold is that the borrowers can enjoy flexible repayment options. Most lenders offer a variety of repayment options such as monthly interest payments, bullet payments, and the option to pay only the interest during the loan tenure and the principal amount at the end of the tenure. This makes it easier for borrowers to choose a loan type that suits their financial needs.

Customers should try to make all interest payments on time, to avoid any late fee charges or penalties. Customers should also follow the loan renewal timelines to get the optimum out of their gold loan schemes. But in critical cases when customers face acute fund shortages and are unable to make necessary payments, they may be offered a minimum due option, which will help them to maintain their loan accounts with minimal amount payments. The payment will be a small portion of the principal amount and a share of the interest.

Purpose of availing a Loan against Gold

Given the salient features of loans against gold, it is one of the most preferred loan options for salaried, business professionals, pension holders, and homemakers alike. Availing a loan against gold can be much more flexible compared to other types of loans due to its no restrictions on end usage. Since the loan amount on a gold loan is not restricted to a specific purpose, borrowers have the liberty to use the funds as per their requirements. The loan amount can be used for a variety of purposes, such as funding a business, medical emergency or even paying for a child’s education.

Process of Availing a Loan against Gold

An individual can choose to apply for a gold loan either online or offline. To avail of a loan against gold, here are some of the standard steps involved:

  • Visit the official website or the nearest branch of the lender.
  • Hover over the loan against gold section on the website.
  • Fill in the necessary details and apply for a home evaluation facility offered by the lender.
  • Submit the necessary documents to proceed to the next step.
  • Click on the ‘submit’ button to submit the loan application form.
  • Wait for the lender’s representative to get in touch with you.

Most Financial Institutions provide home gold evaluation services and disburse the loan amount on the same day of the loan application, provided the eligibility requirements are met and the documents are duly submitted.

Risks Associated with a Loan against Gold

A loan against gold is a secured loan where a borrower need to pledge their gold ornaments to fulfill their urgent capital requirements. If one has enough gold jewellery, one can take a loan against gold easily. Here, the lender gets security in the form of pledged gold whose value is much more than the amount lent. Hence the lender can recover the outstanding loan amount in case the borrower fails to repay the loan amount on time. Before putting the gold on auction, lenders usually send a few notices to the lenders, failing to repay which results in the pledged gold becoming the lenders’ property.

Comparison with other types of loans

A gold loan is a secured type of loan where the value of the collateral is always higher than the amount lent. The type of loan is almost a risk-free lending product for a bank or an NBFC. The lending institutions pass on the benefit in the form of interest rates, which are generally lower compared to other types of loans, such as personal loans and secured loans. In fact, due to this reason, a loan against gold is considered one of the best forms of short-term borrowing.

Precautions to take while availing a Loan against Gold

Although loans against gold are one of the preferred type of financial tools to aid short-term emergencies, one must be mindful of certain things to ensure a pleasant borrowing experience. Here are some of the precautions one must take while availing a loan against gold:

Borrow Only the Required Amount

It is important for the borrower to know the maximum amount they can borrow against the gold pledged. The loan amount depends on the purity, quantity, and value of the gold. One must borrow only the required amount which can be repaid in a timely manner.

Prefer Only a Reputed Lender

The interest rates, repayment options, and eligibility on loans against gold differ from lender to lender. Hence, it is important to perform a thorough check before choosing a lender. Ensure that the lender you choose has a positive reputation in the market to ensure a seamless loan process. For instance, if you take a gold loan from Muthoot Finance, the company provides insurance against the gold you pledge, thus, in the unfortunate event of theft or natural disaster that results in the loss of gold, you will be compensated. And Muthoot Finance is labeled as India’s Most Trusted NBFC.

Ensure Timely Repayment

Although availing a gold loan at home does not require any credit history, it is always advisable to repay the loan amount in a timely manner.

A loan against gold is one of the most convenient ways to deal with financial emergencies. If you are looking for a ‘loan against gold near me’ with attractive interest rates, flexible repayment options, and quick disbursements, look no further than Muthoot Gold Loan at Home. With Muthoot Finance Loan at Home, one can simply request a gold loan, get the loan valued at home, and get the required capital instantly immediately after a successful loan application. Get the best loan against gold from the comfort of your home that fulfills various financial needs.

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