• June 7, 2023
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The Advantages of Choosing a Gold Loan over Other Types of Credit

Gold Loan

There are several types of emergencies that may befall a person, leading to a sudden rise in their expenses. In order to meet such expenses, at times, a person may need to opt for some kind of loan or credit from a lender, especially if they don’t have an emergency fund or if that fund is inadequate in the situation. In these scenarios, it is believed that a gold loan may prove to be one of the best options one has to meet their financial requirements.

If you find yourself in need of funds, here are some advantages of a gold loan over other lines of credit that you should consider:

Lower Interest Rates

One of the biggest advantages of a gold loan is that it typically has lower interest rates as compared to other loans, like credit card loans or personal loans. This is because a gold loan is a secured loan and is disbursed against collateral which is secured with the lender for the tenure of the loan. A borrower pledges their gold ornaments, jewellery, the value of which is calculated based on its purity, the rate of gold on that day, and its weight. The loan amount that is sanctioned is based on this proportionate value. Providing a loan against gold is not very risky for a lender, which is why they are able to offer lower rates of interest on gold loans.

Easier Eligibility

High credit scores and proofs of income are required for other types of loans as proof of a borrower’s repayment capability. However, when a person takes a loan on their gold items, the gold is kept as a security against default. This makes gold loans a good option for people with low credit scores or irregular incomes. In fact, you can increase your credit score if you pay your interest payment on time.

Faster Processing

You can easily check out the details of a gold loan, apply, and get the loan amount disbursed almost instantaneously, as the processing of a gold loan is done much faster than most other types of loans. This is because of the simple reason that the evaluation of the gold does not take much time and there is hardly any other lengthy verification required for taking a gold loan. In fact, these days, with services like Muthoot Finance’s Gold Loan @ Home, it has become even more convenient. Borrowers can opt for the gold loan at-home service, staff from Muthoot Finance will visit your home, guide you through the process, perform the valuation of the gold, submit the application, and take it to the nearest Muthoot Finance branch once the loan amount is disbursed in your bank account.

Flexible Repayment Options

Another one of the best benefits of taking a gold loan is the number of options you have in terms of tenures and repayments. Lenders like Muthoot Finance offer a range of tenures that you can choose from to make your repayments, which can be done in the form of monthly interest payments or as a lump sum repayment at the end of the tenure. And you have an end number of digital platforms that supports your gold loan payment. Like Phone Pe, Google Pay, Pay TM, etc., and also you can make payments through the iMuthoot app or from the Muthoot Finance website.

In instances of emergencies where customers face financial constraints and are unable to fulfill their essential payments, an alternative known as the minimum due option may be presented. This option enables customers to maintain their loan accounts by making smaller payments. The payment will include a small portion of the principal amount and a portion of the interest, ensuring some progress is made toward fulfilling their obligations.

No Prepayment Charges

Mostly, lenders do not charge any penalties if you prepay your gold loan before the tenure ends. So, if you are able to repay the loan on gold that you took, you can do so without having to pay any extra charges. This however may vary from lender to lender, so make sure you go through the details of the offer when you opt for a loan against gold.

Milligram Rewards for Referrals and Transactions

This is a “Gold Milligram Reward” customer reward program in which transactions with the Muthoot Group are rewarded with reward points. One Gold Milligram reward point equals one 24 ct Milligram Gold coin that can be redeemed. Any of our existing customers who refer a NEW customer to Muthoot Finance / Group (the consumer must be new to Muthoot Finance) will receive 20 Milligram reward points per referral. The redemption is subject to the following Terms & Conditions. Follow the link below for better clarity on Muthoot Milligram Reward.


The Loan Amount

Whether it is a credit card loan or a personal loan, the maximum amount that a person is eligible to get is calculated based on their creditworthiness and repayment capability. However, for a gold loan, the maximum amount that one may avail is calculated based on the value of the gold that is being pledged as collateral, and if one is in need of more funds, they can simply increase the amount of gold they are pledging.

Lower interest rates, fast processing, minimal documentation, flexible repayments, etc. are more than enough reasons to see why taking a gold loan is a better idea as compared to other forms of credit.

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