A loan in which gold jewellery is used as collateral security is called a Gold Loan. Nationalized banks, private banks, as well as other financial institutions offer Gold Loans at reasonable interest rates. Gold Loans offer flexibility, unlike other loans that may have fixed terms and conditions for how you use the funds received.
Your credit score is a numerical summary of your credit history. It shows how you manage and handle your credit payments. Your credit score will be affected if you delay paying any credit card bills or loan EMIs. You may not be able to borrow additional loans if you have a poor credit score.
If you are in dire need of cash but have poor credit, you can apply for a gold loan to help improve your credit score. Many financial institutions will lend loans to people who have sufficient collateral. In the case of a gold loan, the collateral would be gold ornaments/articles with purity ranging between 18-22 carats.
Prompt repayment of your gold loan can significantly improve your credit score. A gold loan that is repaid on or before the due date will have a greater impact on your credit score than an unsecured personal loan. Financial institutions don’t see delayed payments of secured loans, especially Gold Loans, as negative as they do delay payments of other unsecured loans.
Additionally, interest rates on unsecured loans might be higher than those for gold loans.
Want to Improve your CIBIL score? Here is How you can do it:-
- Repay on Time:- Credit scores range from 300 to 900. A credit score of 700 or higher is considered good credit. Credit scores help lenders understand how you manage your finances, such as past credit history and repayment behaviour. Your credit score will be affected if you are negligent in repaying loan EMIs.
It is possible to improve your credit score by using a gold loan. All your EMI repayment data are submitted to the CIBIL every few months so they can update credit scores in your credit report.
To repay a gold loan in order to improve your CIBIL score, you must pay the EMIs on a regular basis. The gold loan has a fixed interest rate and term. Regular EMIs are required if you wish to improve your credit score. Lenders inform credit bureaus about all payments towards the gold loan. Borrowers who pay the EMIs on a regular basis are also able to make positive financial developments in their lives.
- Maintain Financial Discipline:- Yes, gold loans are the best way to improve your credit score, regardless of whether you have a poor or good score. But for that, you must make sure you pay all EMIs promptly, as discussed above. A gold loan carries the risk of losing your precious metal if you don’t repay it within the agreed time. But to be able to repay on time, you need great financial discipline.
How is Your Eligibility for a Gold Loan Determined?
Before approving loan applications, lenders evaluate the purity of gold and its weight and offer jewel loan per gram basis. Many lenders offer up to 80% of market value. This is also called the “Loan to Value Ratio”.
The LTV of a lender is set by the Reserve bank of India.
Paying your gold loan EMIs on time will demonstrate responsible behaviour. This is also reflected in the credit reports of lenders. A lot of financial companies can assess your creditworthiness and may offer you a reduction in interest rates if you apply for certain kinds of gold loans.
Gold loans are a fast-growing trend for quick financial relief in times of financial crisis and also for CIBIL repair. You just need to approach the best gold loan company to meet your requirements.