Loans availed by pledging gold articles to legalized financial lenders like banks and Non-Banking Financial Companies (NBFCs) are gold loans. Long before the Government Of India or the Reserve Bank Of India legalized gold loans, citizens of the nation have been accustomed to gold loans provided by the local pawnbrokers or goldsmiths. The nativity of gold loans made it simple and more convenient to avail as the days passed. Also, gold articles and ornaments are immobile assets, they can be carried anywhere, and over three-fourths of Indians have lockers and safe boxes filled with gold which makes pledging them easier. Like customers, the financial lenders also prefer gold loans over others as the collateral stays in their hands till the repayment of the loan. Additionally, the features and benefits of a gold loan attract more people and help them at times of financial requirements and crisis.
Lenders typically classify loans as secured and unsecured. The gold loans are secured, but besides that, a loan can also be categorized depending on the loan’s purpose and usage. For instance, a car loan is designed for a car, its related financial requirements, a home loan for a house and its needs, and a business loan for business purposes, but a gold loan is designed for any reason. A gold loan can be used to buy a car, renovate a house or expand a business, and it is the borrower’s choice. A bank or financial institute doesn’t question the applicant their purpose before signing off on a loan. This reason is also another that makes a gold loan feasible. The general principle of a gold loan is that upon pledging gold article(s), the bank or NBFC grants loan amount for a certain period by the end of which the borrower should’ve paid the principal with interest. After the repayment of the gold loan, the lender returns the pledged asset(s) safely to its rightful owner(borrower) immediately.
Why are gold loans demand and need ever-growing?
There are uncountable reasons why most people prefer gold loans over other forms of loans and debts. The first one being the minimal documentation requirement. The lenders are licensed financiers. Therefore, they pay taxes and account for every transaction made. So, before sanctioning a loan, they have specific requirements from the applicants to disburse the loan amount. And the documents mainly include income proof, bank statements, ID proof, and address proof aside from the CIBIL score criteria. The CIBIL score indicates the borrower’s loan repayment capability and is calculated based on the previous payoff of the loans and debts acquired from a bank or NBFC. But, with only an ID proof and an applicant of legal age and valid collateral, a gold loan is sanctioned. The reason behind this is the asset pledged(physical gold). As mentioned, the collateral remains in the hands of the lender till the repayments. If, unfortunately, the borrower cannot repay the loan amount or defaults at paying the interest amount succeedingly for more than three months. The bank or the NBFC has the right to auction the pledged gold article(s) to compensate for the owed money. Therefore, loan repayment is necessary, and as the Gold Loan Interest Rate and the tenure are flexible, most people pay off the loan on time or even before the tenure’s end as prepayment. Additionally, the loan processing is speedy, and the loan amount disbursal is done within minutes of the gold loan’s approval. And that’s why the gold loan’s demand is ever-growing.
Manappuram Finance Limited is a financial institution based in Kerala. The NBFC is one of the highly reputed gold loan providers. The Manappuram Gold Loan Rate Per Gram starts from Rs 3,506. The financial institute has affordable interest rates and provides loan amounts up to Rs 1.5 crore. The official website of the company presents more information on gold loans and their features.
