Gold Loan in a monetary crisis
Gold Loans have continued to maintain their popularity in India even in the Pandemic. When thousands of people lost their jobs and most suffered cuts in their salary, Gold loans were a very easy option to turn to for money requirements.
Most banks and NBFCs are rolling out great offers for their customers. This is because since the demand has increased and the market has grown, a lot of new vendors have come into the picture. All wanting to sell their products, are selling them at competitive rates.
Gold loans are the most popular due to the lowest interest rate they have plus the minimum documentation and eligibility criteria. Let us see if taking a Gold loan is the right choice during a pandemic.
Only two documents needed
The only two documents needed for availing of gold loans are identity proof and address proof. For entity proof and address proof, you can use one document that is an Aadhar card that shows your address as well as your identity.
Lowest interest Rates
You will receive the lowest interest rates on the gs compared to any other loans. Moreover, if you have been a good customer, your chances of getting the loan easily. Hence they are the most feasible option at the time of financial crisis. Banks usually have lower interest rates than NBFCs. Since NBFCs give more value if your gold is a gold loan, they have a higher risk of losing money in case the borrower defaults, therefore, they charge higher Gold Loan Interest Rates due to this high risk.
No restrictions to end-use
Unlike car loans and home loans, you are not liable to use the money only for a specific purpose. You can use the loan money in whatever way you want.
Minimum processing fees
Gold loan products have little to no processing fees. At the time of financial crunch, even this small relief can be of great value.
Fastest processing
The technological advancements in the Gold loans sector have allowed the processing time to be greatly reduced. The Gold loan can be disbursed as fast as within 30 minutes of approval. Therefore, at the time of financial emergencies, they are one of the most preferred options.
Gold loans are the most preferred option at the time of money requirement but there are a few things you must consider before applying for a Gold Loan.
LTV Ratio
LTV stands for Loan to value. Since you know that 100 percent of a gold's worth cannot be given as a loan for lender’s security purposes. This ratio indicates how much of your Gold's monetary worth would you get as a loan. Banks usually have a lower LTV ratio while Non-Banking Financial Companies have a higher LTV ratio. The Reserve Bank of India has currently set the limit of 75% LTV for banks. NBFCs can give up to 90%.
Check Manappuram gold loan rate per gram here.
Quality
Your Gold must be between 18 to 24 karats to qualify for a loan. Anything below 18k would get rejected at the time of verification. Lenders have specialized equipment for checking the quality of Gold and they don't take more than a few minutes.
No bars accepted by banks
Banks currently do not have the permission to accept gold bars to give loans against them. They only accept gold ornaments and gold coins.
Choose the trusted lender
A lot of people get lured by the extremely low interest rates by unknown agencies and take loans from them. There are a lot of fake agencies that can replace your original golf with a fake one or even disappear once you get the loan. Therefore, do a proper background check before giving your precious jewelry to any lender.
Keep the tenure in mind
Remember that Gold Loans are short-term loans and you would have them pay them back mostly in one year. But if you are facing financial problems, make sure that you would be able to repay them on time otherwise your gold would be sold off to compensate for their loss.
Conclusion
The instability of regular cash flow is a major cause of stress which makes a person unable to perform daily basic activities. A gold loan can be the perfect solution to this problem if taken with proper precautions.
Also read this: How can a gold loan be availed from a bank or NBFC?