Gold is considered the most valuable asset all over the world. However, many people are not aware of the fact that gold can also come in handy in a situation when they need to fund their emergency cash requirements. Instead of keeping your gold idle in the bank lockers, you can use it to borrow a sufficient amount of money. In this article, we have discussed some reasons in the form of benefits to taking a gold loan.
- Quick and free processing: Gold loans demand physical gold as collateral, and banks and other financial institutions are more than happy to lend loans to the people. For financial institutions, lending money by securing gold as collateral is a safer option as in case of any default in payment; the institutions can easily sell the gold in the market to cover their money. Therefore, financial institutions don’t take much time to disburse the gold loan. Due to less processing time, no processing fee for providing the gold loan is charged by many banks.
- Offering ‘pay Interest only’ option: Banks and other financial institutions providing gold loans offer the borrowers borrowing money under gold loan a unique feature allowing them to pay the interest charged on the loan while repaying the loan. They need not pay the principal till the duration for which the loan taken has been over. Usually, the principal amount is paid when closure formalities of the loan are being undertaken.
- Charging lower interest rates: Gold loans are considered one of the most secured loans. Thus, allowing the banks to charge a lower rate of interest compared to the rate of interest charged on other types of bank loans. The rate of interest on the gold loan varies between 13%-14%, whereas on the personal loan, the interest rate is around 15%. The gold loan interest rate charged is further reduced for the individuals providing collateral additional to the physical gold.
- No issue of having bad credit history: Almost in each loan, the loan amount granted by the banks depends on the loan repayment capability and credit history of the borrowers. But the process of lending gold loans is different. Banks providing gold loan doesn’t check your credit history. Since gold is kept as collateral, it does not matter if you have a bad or good credit history because the bank is assured about the repayment of the principal amount.
- Providing safety of the gold: Many people worry about the safety of their physical gold kept as collateral in the banks. But there is no need to worry. It is the banks that are responsible for maintaining the safety of the physical gold. Your gold is placed in the vault of the banks. Once the loan is repaid to the bank, you will get your gold back.
Gold loans do not involve any strict legal formalities and, thus, are easy to get. But one should always repay the loan on time because, in case of default, the gold kept as collateral is seized by the banks.