How To Explore Funding With Gold Loan Schemes

Get the information you need to make an informed decision on using gold loan schemes as a funding option. Read to learn more!

17 Jan,2023 11:16 IST 1982 Views
How To Explore Funding With Gold Loan Schemes

When one is short on cash and needs money in a hurry, one of the best options at hand can be a gold loan. A gold loan is essentially collateralised credit in which one’s personal gold ornaments are pledged against the money borrowed for a short period of time.

The loan is advanced after the purity and quality of the gold has been verified and its market value has been determined by the lender. The gold is kept safe, and at the end of the loan tenure, once the principal and interest have been repaid, the same is returned to the borrower.

The best part about availing a gold loan in the age of digital finance is that the entire process can be done online and from the comfort of one’s home. Moreover, the credit history of the borrower does not matter as the pledged gold can be confiscated by the lender in case the loan remains unpaid and the borrower defaults.

The money borrowed via a gold loan can be used for anything from funding the requirements of a small business to meeting unforeseen medical expenses to undertaking some necessary home repairs to even paying off a child’s school fees. In short, there is no real bar on how the money may be put to use for any legitimate purpose whatsoever.

Moreover, the documentation needed for availing a gold loan too is very basic. All one needs is an identity proof (PAN card, voter ID card, driving license or passport), address proof (passport, driving license, gas or electricity bill) and a passport-sized photograph.

Advantages Of A Gold Loan Over Other Forms Of Borrowing

1. Lower Interest Rate:

A gold loan can be a better idea than a personal loan as it is collateralised, and to that extent, can be availed at a lower rate of interest, provided the gold matches the minimum standards set by the lender.

2. Minimal Processing Fees:

Another advantage of a gold loan is that lenders typically charge minimal processing fees on the application.

3. Credit Score Does Not Matter:

Since gold is being offered as collateral, the credit history of the borrower does not quite matter.

4. Minimal Documentation:

Most lenders do not ask for too many documents apart from the basic identity and address proofs while giving out a gold loan, as they already have the yellow metal as collateral.

5. Insurance Cover and High LTV:

Not only do good lenders offer their clients an accidental insurance cover while availing of a gold loan, but also a high loan-to-value ratio of 75-80%. These two aspects can make a gold loan a better deal even than say a personal loan.

6. Flexible Repayments:

Lenders offering gold loans allow their clients to repay flexibly. Borrowers can choose to repay interest only every month during the tenure of the loan and then the principal amount at the end of the period. People can also choose to be smart and repay the principal amount in monthly installments and then the interest at the end of the tenure. This way they pay interest only on the unpaid principal amount, thereby bringing down their outgo.

Loan To Value

The amount of money lent is based on the purity and depends on the price of gold at that point of time. The ratio of the money lent to the value of gold is called the Loan to Value (LTV) ratio and varies from lender to lender.

Conclusion

As is evident from the discussion above, a gold loan is one of the best ways to avail short-term credit for immediate personal needs or to fund a small business for a while.

As a borrower, you should only approach a good lender like IIFL Finance which has a strong reputation in the market and can offer some of the best interest rates in the market.

Moreover, IIFL Finance can also offer some of its most valuable clients value-added services, apart, of course, from allowing you to apply for the loan online and having your gold valued at the comfort of your home.

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