Why Are Gold Loans A Dependable Option In Uncertain Times?

Discover why gold loans are a dependable option in uncertain times. Learn about the benefits and flexibility of gold loans in India.

1 Jul,2023 13:42 IST 3267
Why Are Gold Loans A Dependable Option In Uncertain Times?

Gold loans are a popular financial service available in India, providing borrowers with instant access to cash at reasonable interest rates. Gold loans are particularly appealing to borrowers due to the flexibility and multiple benefits they bring.

A gold loan is a secured loan for which you need to give your gold asset as collateral. The lender provides an amount equivalent to the pledged asset, which can be repaid in full, in installments, or through EMIs, according to the conditions of the loan agreement. It is optional to give credit history or proof of income.

No tax benefits are associated with gold loans unless you use the funds for residential property acquisitions, building projects, home improvements or as a business expense. Customers are eligible for a tax benefit if the funds are utilized to build or buy a principal residence.

Gold loans typically have a higher maximum cap on loan amounts than personal loans. Compared to gold loans, which can be obtained for up to Rs. 5 crores, most banks and financial institutions give personal loans up to Rs. 40 lakhs. Gold loans are a good option if you need a larger loan amount.

You do not need to worry about your credit score with a gold loan because banks do not consider your credit history. Before applying for a gold loan, you are typically not obliged to disclose any of your current debts or debt obligations as long as the gold you submit as collateral is authentic and within the eligible standards.

Gold loans have lower interest rates than personal loans, making them less expensive than other loans. Additionally, you will have the flexibility to select the repayment mode for gold loans. Unlike different types of loans, gold loans offer a variety of repayment choices. The three most popular repayment choices are as follows:

1. Conventional EMI choices or
2. Pay off only the interest during the loan term and the remaining balance after the loan term, or
3. Pay the principal plus interest at the end of the loan's term; make no payments before then

Gold loans are considered one of the safest and most secure loans a bank can offer. The risk of lenders is mitigated because of the collateral. Additionally, borrowers, who typically found it cumbersome to keep their gold ornaments at home due to safety concerns, can now rely on banks for their safety. 
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What Are The Benefits Of Taking A Gold Loan?

Numerous benefits of Gold Loans make it an attractive financing option for borrowers. The most popular ones include the following.

1. Secured Loan benefits

Loans are categorized as secured and unsecured. Unsecured loans require no collateral, but you have to fulfill stringent eligibility criteria. Since a Gold loan is a secured loan, lenders require collateral. However, they usually sanction such loans easily. Since it is secured, you do not have to show income proof to obtain high-value gold loans. Plus, lenders levy a lower interest rate due to the pledged gold.

2. No Need For Credit Score

The only condition you need to comply with when you apply for a Gold Loan is that you must possess gold in the form of jewellery, etc. You can obtain the loan even if your credit score is low. In fact, many Gold Loan lenders do not insist on credit scores, contributing to the immense popularity of these loans.

3. Reusing The Same Gold Repeatedly

Once you have repaid and got back your Gold, you can use the same gold to obtain another loan. Since the Gold Loan amount is based on the gold's market value, you can even get a higher loan amount if the gold price rises.

4. Flexible Repayment Terms

Gold Loans are not amortized, i.e., you need not pay the interest component and principal amount in every EMI. Instead, you have the option to only repay the interest component in EMIs during the loan tenure and pay off the principal loan amount as a lump sum when the loan matures. This attribute makes a Gold Loan an excellent, pocket-friendly option. Moreover, you can also prepay the principal amount partially during the loan tenure and reduce your interest amount.

Conclusion:

In tight financial situations, gold loans will still be a popular way to finance personal and commercial demands. Gold loans from reputable financial organizations like IIFL Finance. So, steer clear of feeling helpless in times of abrupt situations due to a lack of liquidity. Utilize your idle gold holdings to have quick access to the required funds. And if you are looking for a multi-step-process-free gold loan option, turn to IIFL Finance gold loan online for hassle-free and quicker access to cash flow.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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