Loans, in general, can get really messy so it is essential for the potential borrower to know about and understand the various aspects of the process. Gold loans are established as one of the easiest and fastest loans as compared to all the other secured or unsecured loans.
Talking about secured and unsecured loans, we should understand what they mean and what’s the difference between them.
Secured loans:
These are the loans that have some security attached to the validity of the loan, ie. collateral. This can be in the form of property, valuables like gold, etc. These loans are usually easy to obtain as the bank or financial institution has a form of security behind the loan which they can use in the case of defaults to fill in their losses by selling off the assets. This option for the lender makes it easier for them to trust people with loans.
Unsecured loans:
The unsecured loans are those which do not have any collateral substantiating them. They are loans that require credit reports or CIBIL scores to pass the application process. They also require bank statements, a lot of paperwork, and legal documentation as a process and take longer to access.
Now, the Muthoot finance gold loan falls under the category of secured loans. These loans are secured by the gold which is kept as the collateral in the bank/ financial institution and can be redeemed back once the loan is fully paid back.
To apply for a gold loan, a person needs to first choose a lender which they think best suits their needs. This can be chosen by comparing the gold loan interest rates or the gold loan per gram rates offered by the bank or financial institution.
Then, the borrower needs to carry documents for identification and address proof to submit to the lender as well as the gold for deposit and inspection. The next step is to fill out basic paperwork which is actually pretty standard for all loans. The difference in gold loans is that the borrower will need to self testify what items they are keeping as collateral to eliminate confusion in the future.
The lender then cross-checks this, and the paperwork is finished by finally choosing a repayment plan. There are a lot of different schemes for repayment that are offered by various financial institutions that people can opt for.
Then finally, the last step to the process is to weigh the gold, estimate its value, and then determine the 75-80% of that value. This is the amount, you, as the borrower will receive in exchange for the collateral.
