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How to Improve Your Credit Score with a Gold Loan?

Improve Your Credit Score with a Gold Loan

Credit Score is one of the most important aspects of any individual’s financial life. Ranging from 300 to 900, a credit score simply indicates the way an individual handles his or her overall debt; be it credit card bills or loan EMIs. Your credit score plays a crucial role when you want to borrow some money from a lender. A low credit score can affect your loan amount, interest rates, loan eligibility, etc. So how can you improve your credit score? Well, one of the popular methods by which you can do so is a Gold Loan.

At a time when everybody is struggling with economic and financial hardships caused by the COVID-19 pandemic, gold prices are rising with each passing day. Due to this, individuals are going for the Gold Loan as they can get a higher loan amount. Well, gold prices have gone past INR 50,000 per 10gm (Gold price changes daily basis various economic factors) recently, and the loan amount directly depends on the price of your jewellery and ornaments. Banks can provide you a loan amount upto 90% of the overall gold value. Apart from getting a higher loan amount, you can also improve your credit score with Gold Loan.

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In this article, we will cover everything related to the improvement of your credit score with the Gold Loan. So, to know more about this, you should keep reading this post.

What is the Role of Credit Score in a Gold Loan?

The best thing about a Gold Loan is its lenient eligibility criteria, unlike unsecured loans. Lenders do not check the credit score of an individual before approving your gold loan application. So, even an individual with a poor credit score can apply for a gold loan and improve it over time by repaying the loan amount on time. Your Gold Loan will solely depend on the gold ornaments and jewellery that you will submit as the security against the gold loan amount. The loan amount will also be decided based on the overall price of your gold.

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However, a credit score can affect your Gold Loan rate of interest. Individuals with a good credit score (700 or above) can get lower rates as compared to people with a poor credit score. This is one of the reasons why so many people also opt for a Gold Loan.

Methods to Improve your Credit Score

Repayment history is one of those aspects of your credit score that holds the most weightage of 35%. To improve your credit score with a Gold Loan is to repay the loan amount on time. We are showing some of the ways with which Gold Loan repayments affect your credit score. Have a look!

Timely EMI Payments

One of the best features of a Gold Loan is its flexible repayment methods. Lenders provide several repayment methods of which Equated Monthly Installments (EMI) is one of the popular ones among customers. The other methods are Bullet Repayment Methods, Upfront Interest Payment, Interest Payment at the end of tenure.

Coming back to the EMI repayment methods, you will need to pay a fixed amount every month towards repayment of the loan. This amount will consist of a portion of a principal amount and interest amount. When you pay your EMI on or before the due date, your credit score will start to improve over time as we told you about the significance of the repayment history. Making EMI payments on time during all your tenure will increase the credit score gradually. You also need to remember that if you miss any repayment, your credit score can affect negatively. If you pay the EMI amount even one day late, it will reflect in your credit report.

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Early Repayment of Gold Loan

Gold Loans are usually considered to be loans with a shorter tenure that you can choose according to your convenience. One of the efficient methods to improve your credit score via Gold Loan is to make the repayment before the pre-decided tenure. Several lenders do not ask for any prepayment charges on a Gold Loan. When you clear off your gold loan with early repayment, this will reflect in your credit report and will impact your credit score positively. So, if your finances allow you to make the early payment of the Gold loan, this is certainly one of the best ways to improve your credit score.

Gold Loan Brings a certain Credit Mix

Having a credit mix in your overall profile also helps in improving your credit score. This is also one of those aspects of your overall credit score that holds 10% of the overall weightage. Having a credit mix means having both secured and unsecured loans in your financial profile. As you know that Gold Loan is a secured loan as you pledge gold ornaments and jewellery against the gold loan amount. That’s why a Gold Loan helps individuals in bringing that certain credit mix in their profiles.

Suppose you already have a credit card (an unsecured type of credit) on your name and you need immediate funds. Then it would be better for you to opt for a gold loan instead of a personal loan, which is an unsecured loan. So, a gold loan will reflect on your credit report, and if you repay it on time, your credit score will certainly improve. Being a secured loan, gold loan interest rates are also lower, so the EMI amount will automatically be lower and you can easily repay the loan amount.

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Use the Gold Loan EMI Calculator to Estimate Your EMI amount

One of the efficient methods to make sure that you pay your EMI on time is to keep this amount within your repayment capacity. So how can you do it? Well, you should have an early estimate of the EMI amount to know whether this amount is within your repayment capacity or not. This can be done using the Gold Loan EMI Calculator. It will provide you the EMI amount according to your loan amount, Gold Loan interest rate and tenure.

When you will have an early estimate of the EMI amount, you will be able to manage your finances better. When you have a certain EMI figure in your mind according to your repayment capacity, chances of paying the EMI on time are higher. Individuals who don’t use this tool often end up missing their EMI payments and thus affecting their credit scores negatively. So, always use Gold Loan EMI Calculator before opting for a gold loan.

So, these are some of the methods to improve the credit score with the Gold Loan. If you are struggling with a poor credit score and looking to improve it, keep these methods in your mind.

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Personal Loan Interest Rates September 2020
Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 18.49%
IndusInd Bank11.25%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates September 2020
Axis Bank7.75% - 8.55%
Bank of Baroda7.00% - 8.40%
Citibank8.20%
HDFC6.90% - 7.65%
ICICI Bank6.95% - 8.05%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank7.20% - 9.30%
LIC Housing6.90% - 7.90%
Piramal Capital & Housing Finance9.00% - 9.10%
PNB Housing Finance8.60% - 9.45%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.95% - 7.60%
Tata Capital9.20% - 9.35%