There are a number of reasons people take out loans. This can be for a personal expense, such as education or to buy a home, or it may have to do with funding a business. To meet the different requirements of each of these needs, there are many types of loan options for borrowers to choose from.
Gold loans have become increasingly popular for a number of reasons, especially because they can be availed without a fixed reason, thus serving multiple purposes. Most people know the advantages of gold loans include that they are affordable, convenient, and fast. But people may not always know that gold loans offer a lot more, making them the right fit for their financial needs.
A list of gold loan benefits
Understanding the different advantages of gold loans can help a borrower know what they should look for when choosing a lender. Analysing each benefit and the difference between gold loan companies and their offerings can also help a borrower get the most value for their gold in every way.
Gold loans are secured loans, which require the borrower to offer an asset as collateral to the lender. With unsecured loans, lenders face a higher risk of loss since the amount is not backed by collateral. By providing security, the lender can secure the debt beforehand. This assurance permits the lender to offer a loan without hesitation to the borrower. This assurance for the lender means that borrowers can trust that their loan application will be immediately approved, which is not always likely for an unsecured loan.
Since gold loans are secure, lenders are more likely to offer flexible repayment schemes for borrowers. This can benefit the borrower as it allows them to repay the amount in installments that consider their individual financial standing. Moreover, the borrower has the option to make interest payments alone, instead of interest and principal combined. With flexible repayment, borrowers can limit or lower their monthly payments to focus on other needs as well. Usually, gold loan companies offer tenures between 6 and 36 months.
Gold loan benefits grant affordability in a number of ways. Not only does flexible repayment allow consideration towards a budget, but the interest rates of a gold loan are lower since the risk factor for the lender is less. Gold loans have some of the lowest interest rates in comparison to other types of loans, and this actually works to enable quicker loan repayment as well.
High Loan to Value (LTV) rate
It’s important to note that unsecured loans set the LTV on the basis of the borrower’s credit history, which can vary greatly. With gold having a relatively fixed value, g Gold loans make for better options in terms of LTV, which stands for loan to value ratio and is an expression of the valuation of an asset. In the case of a gold loan, the asset is the gold itself, which is a highly valued commodity in any market. This is the reason why the LTV of gold loans is always high, ensuring that the borrower gets the best value for their asset.
One of the major gold loan advantages is the relaxed eligibility requirement compared to other loan types. Most loans require the borrower to furnish credit history with a CIBIL score and income proof, along with a long list of other documents. These types of credit checks help lenders establish whether the loan candidate has a credible source of income to repay the loan amount. But with gold loans, only KYC documents are required, which means unemployed individuals can also apply for a loan sanction. Moreover, the borrower owns the asset which serves as collateral for the loan. For this reason, gold loans do not require a credit history or other such proof, such as ITR documents, payslips, etc.
Easy documentation process
The documents required for a loan application can be a hassle. Loans usually require a lot of details including income proof, salary history, tax records, and more. Furthermore, certain loans require documents that are relevant to the type of loan being availed. For example, a business loan requires borrowers to present profit statements, ITR documents, and more. Gold loans, on the other hand, only require basic KYC details which can be presented a lot quicker than the document work for other loans. Thus, the document work is hassle-free and much quicker with gold loans.
Quicker loan processing
Since gold loans require so few documents and do not call for lengthy eligibility checks, they are processed very quickly, usually within 24 hours or application. This can save borrowers a lot of time and can be important in situations that are time-sensitive and require funds quickly. It can take weeks to process the document work for business loans and education loans, which may not be favourable.
Instant loan transfer
Taking a gold loan is one of the fastest ways to receive instant funds. This gold loan advantage can be especially handy in times of an emergency, such as a medical or business situation. In such extreme circumstances, a lot can be at stake for the borrower, and waiting for loan disbursal can complicate the whole matter. While some other types of loans can also be processed quickly, the loan disbursal can still take time. A gold loan is a good option in such cases as the loan can be disbursed in a matter of mere minutes after loan processing.
India has the world’s largest gold consumption, with most of it stocked in Indian households. This makes gold an extremely accessible asset, readily available in most homes. Moreover, most gold is usually stored at home or in bank lockers. Taking all this into consideration, a gold loan becomes a more convenient option than other secured loans like mortgages.
Even though there are a relaxed set of eligibility criteria for availing a gold loan, it can help to know that gold loans act as credit enhancers in multiple ways. Since the repayment is affordable and can be quick, this works to build your score up. Gold loans also help add to your credit mix, which is a factor the CIBIL report takes into consideration.
Gold loan advantages with Rupeek
Rupeek offers all these gold loan benefits and much more. When you choose Rupeek, you get the highest LTV, lowest interest rates, and instant loan disbursal. Additionally, Rupeek aims to make your gold loan experience the best – which is why we are completely online to make the process hassle-free.
There is also the added benefit of doorstep services for all gold loans taken with us. To apply for a gold loan, simply schedule an appointment with us, and we will show up at your address to handle the valuation, KYC verification, and the loan disbursal, all in one go! To know more, read our blog on the Rupeek difference.