A precious yellow metal, gold has been the most preferred tangible asset acquired by Indians. It is regarded as a good form of investment and is also widely used as part of different cultural ceremonies. Further extending its usefulness, gold can also be used to acquire a loan. A gold loan lets you deposit the same with the lender in return for a loan amount. It essentially acts as a security or collateral that assures the bank of loan repayment.
Gold loans can be availed of at any point, and the amount of funds extended will depend upon the total value of your asset. If you are wondering when you can use a gold loan, here are some instances when it makes for a viable option:
In an emergency – Life made up of several unpredictable moments and you can never be prepared for a sudden financial emergency. This can crop up from any situation such as healthcare or payment for a specific reason. A gold loan can be a good resort when you need funds urgently for a short span of time.
Seeking a loan without extensive paperwork – There are several kinds of loans available, however, they can exclude extensive paperwork. Completion of this paperwork can take a long time and can beat the purpose of your funding urgency. A gold loan typically requires you to fulfil basic KYC documents. The process is not as lengthy and you can skip the cumbersome paper work.
Smaller loan amount – Although the total amount that you can avail through a gold loan depends heavily on the total value of your ornaments, it is best to seek this kind of loan when your funding requirements are smaller. A gold loan may not get you a very big huge fund and the maximum amount is INR 25 lakhs. However, if you have been a loyal customer with a bank, the amount extended is likely to be much higher.
Repaying a higher interest debt – Gold loans are secured and this helps bank lend them to you at a much lower rate of interest. In case you are repaying a loan or have a debt account with a very high-interest rate, the fund from a gold loan can aid consolidate and repay the high-cost loan.
The process of getting a gold loan is simple and it is helpful to evaluate your financial standing before applying for one. Ensure that the gold loan EMIs fit into your monthly budget or missing payments can hurt your credit score. Additionally, you could even face the risk of losing your gold assets. Thus, you must consider all the aspects carefully before getting a gold loan.