When a borrower pledges to put his or her jewelry, ornaments, and bank-issued coins as collateral to get a loan sanctioned, then such kind of loan is known as a gold loan. The banking institution uses gold as security to repay the debt if the borrower is stuck as a defaulter. The loan amount approved is some percentage of the value of the gold that has been pledged. These loans are short-term loans and the loan repayment tenure ranges in between 1-month to a few fixed years. If you are in an urgency of money for immediate expenses and you are capable to pay it in a short tenure, such types of a loan is a great option for you.
Advantages of opting for a gold loan
Below are a few advantages that a borrower should consider while opting for such loans:
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Lower interest rates:-
Generally, the interest rates of such loans are lower than the personal loans as there is a relatively lower risk for the banks because they have put some gold as collateral. Different financing institutions have different gold loan interest rate with them and the interest rate will vary according to the loan amount fluctuations.
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Really quick process:-
In-country alike India, such loans are some of the quickest loans that are sanctioned by the lender as the institution does not require any computation regarding the CIBIL score. You will get your loan amount quickly after the lender computes the value of the gold.
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No need for salary proof:-
There are numerous cases when the borrower does not require any salary proof or a salary certificate to get such a loan sanctioned. It is because such loans are secured and here the lender accepts your gold as collateral.
Few tips to keep in mind while opting for such a loan
Below are a few things that a borrower should consider while opting for such a loan:
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No emotional issue:-
Gold as an asset has emotional value in our country since it is widely in the form of family jewelry. Providing gold as a guarantor means that you run the danger of losing your family jewelry in case you are not capable to repay the loan. This can lead to mental and emotional pressure not just on the consumer but the entire family.
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Quality of financing institution:-
Several lenders in the country offer fascinating terms for these loans. However, some of them could be badly run and could shut down without any information as leaving you at a loss.
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Quality of gold:-
Usually, only gold of 18K quality and above is accepted by the bank. You also need to be above 21 years of age to get such type of loans sanctioned.Allahabad Bank Gold Loan has some great deals regarding such loans, as the borrower will get a loan for a shorter tenure with a decent interest rate.
