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Why Choose a Gold Loan?

Highlights

  • Why should you choose a Gold Loan?
  • The reasons are low-interest rates, flexible repayment methods, and many more described in this post!

Looking to get out of some financial crunch you are facing currently? Having confusion about which loan option you should go for in these tough times? Well, a gold loan can come to your rescue! Getting the required loan amount against your gold ornaments or coins by opting for a gold loan could be a wise decision. Provided by Banks and financial institutions, a gold loan is kind of a secured loan that you can opt for at affordable interest rates.

Other than interest rates, there are so many reasons that make a gold loan facility a perfect choice for you. First thing first, you can use the unutilized gold sitting at your home to get any sum of the money for your needs and get that metal back once the loan repayment is over. If you are someone who is looking to get money but have not been able to decide why you should opt for a gold loan, then this article could be the perfect read for you. We will tell you about all the reasons which make a gold loan a plausible solution to meet your emergency needs. So without any further delay, start reading them!

What are the Reasons to Choose a Gold Loan?

Factors like low interest rates, extensive repayment options and easy availability of finance make gold loans a right choice for you. Read more about the factors below.

Low Interest Rates

Interest Rates come across as a major factor while applying for any kind of gold loan facility. As we said that a gold loan is a kind of secured loan, it can come at a lower interest rate than most other loans. As you will be submitting your gold to the lender, they face a much less credit risk while giving you the loan amount. And this is the reason behind the low-interest rates.

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The average gold loan interest rate can be 10%-16% per annum. Also, the interest rates can be much lower if you have an existing good relationship with your lender. Due to the low-interest rates, the repayment amount is also low and hence less pressure on your pocket while repaying the loan.

We are providing the gold loan interest rates of some of the top banks and financial institutions in the below table so that you could have a much better understanding of it. Have a look!

Gold Loan LendersInterest Rates (In Per Annum)
State Bank of India (SBI)7.50%
ICICI Bank10.00% - 19.76%
HDFC Bank10.05% - 17.95%
Muthoot Finance12.00% - 27.00%
Manappuram Finance12.00% - 29.00%
Union Bank of India7.00% - 10.10%
Axis Bank14.00%
Kotak Mahindra Bank10.50% - 17.00%
Federal Bank8.50% Onwards
YES BANK9.40% - 15.40%
Canara Bank7.65%

Easy and Instant Finance

In today’s times, where everyone is in so much hurry and wants to get the loan as soon as possible, a gold loan could be the most suitable choice for you. To apply for this loan facility, you just need to visit the branch with your gold ornaments and you can get the loan amount maximum within a day. The lender will assess your gold value and with that, a loan amount will be decided. After the documentation process which is quite minimal, the authentication process will be done. And with that, the loan amount will be disbursed into your account.

Higher Loan to Value Ratio

Loan amount is the most important thing that you should look at. A gold loan can fulfill all your requirements. With the help of a gold loan, you can get a loan amount upto a maximum of 90% and a minimum of 65% of your overall gold value. Let’s understand through this an example. Suppose if the overall value of your gold is INR 10 lakhs, then you can get a maximum loan amount of INR 9 lakhs. The minimum loan amount will be INR 6.5 lakhs.

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While applying for a loan amount, it is important that you check what loan to value ratio is your lender providing. Otherwise, you could face difficulty in getting the required loan amount.

As Many as Four Repayment Methods to Choose from

You must have heard about flexible repayment methods for various loan facilities. But if we have to use this term for one loan scheme then it would be for the Gold Loan scheme. When you opt for a gold loan, you could get more than one repayment option with which you can easily repay the loan amount. This is one of many reasons due to which people opt for a gold loan – the freedom to choose a suitable repayment option according to their repayment capacity.

There are mainly four kinds of repayment options from which you can choose – EMI method, Interest Payment at fixed intervals (monthly/quarterly/ semi-yearly/yearly), Upfront Interest payment, and Bullet Repayment method. You can have a detailed look at all of them in the below table.

Payment MethodDetails
EMI PaymentYou will have to pay a part of your principal and Interest amount in the form of Equated Monthly Installments within the tenure
Upfront Interest PaymentYou can pay the total interest payment at the start of your tenure and principal amount at the end of tenure
Interest Payment at Regular IntervalsYou can choose the option to pay the Interest amount at regular intervals - Monthly/ Quarterly/ Semi-yearly/ Yearly and pay the total principal amount at the end of tenure only
Bullet RepaymentYou can repay the total principal and interest amount at the end of tenure only through this method. However, the interest will keep accumulating at fixed intervals.

End-use Freedom

The loan amount that you get from the Gold Loan scheme can be used for any requirement of yours. There is no limitation on the purpose for which you will use this. You can use the loan amount for your child’s marriage, medical emergency, paying the downpayment of your vehicle, boosting up your business growth, agricultural purposes, or anything else. This is also one of the reasons behind its popularity among the customers.

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Eligibility Criteria

Unlike other loans, the Gold loan doesn’t demand strict eligibility conditions like income criteria, employment type, CIBIL score, or any other. The only requirement for a gold loan is that you must have gold against which you can want to take the loan. If you are an adult who owns gold and wants to get a loan amount against it, you can get the same. It is as simple as that. The loan amount will simply be decided by the value and purity of your gold.

You can also use the Gold Loan calculator to know the maximum amount you can get against your gold ornament by putting the number and weight of your gold.

Minimal Documentation

Easy and minimal documentation is another reason due to which you should opt for a gold loan. You don’t need to provide a long list of documents to apply for a gold loan. You will only need some basic KYC documents, passport size photographs and you will be good to go!

Safety of your Gold

If you are worried about the safety of your gold, you must know that your gold will be safe in the full-proof lockers provided by the bank. It will be safer than your home locker. And your gold is returned back to you as soon as you pay the total outstanding amount. However, you must check the credibility of the lender before finalizing the suitable one for you. Always opt from the reputed lenders by researching about them before.

So these are the reasons that make Gold Loan a perfect choice for those who have gold and are looking to get funds for their several purposes.

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Personal Loan Interest Rates July 2020
Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.99% - 18.49%
IndusInd Bank11.25%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.50% - 18.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates July 2020
Axis Bank7.75% - 8.55%
Bank of Baroda6.85% - 7.85%
Citibank8.20%
HDFC6.95% - 8.00%
ICICI Bank7.45% - 8.55%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank7.40% - 9.70%
LIC Housing7.40% - 8.85%
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%