5 reasons why gold loans are best option in an emergency cash crisis

The urgent need for cash is not a new notion, and almost many of us have faced an emergency that is unforeseen and uncalled for. This leads to an emergency cash crisis and we often resort to loans as one of the mediums to cover emergency expenses. There are short-term and long-term loans. For quick approval for funding, generally personal loans come in handy. However, in the current scenario where interest rates are rising, EMIs on personal loans have gotten costlier. In such cases, availing loan against your gold can be quite helpful.

Whether it's for funding an immediate need like paying for a child's education, medical condition, marriage, urgent need to travel or raising capital for a new business venture, gold loans are seen as the best option. Gold loans are secured loans that can be availed from banks or any financial services provider by pledging your gold as collateral.

Rajesh Shet, Founder and CEO at SahiBandhu gives 5 reasons why gold loans are the best option to fund during a cash emergency. These are:

1. Quick Processing and Instant Disbursals:

With the introduction of cutting-edge technology, gold loans have developed into one of the simplest, most direct, and most secure financing options, especially when immediate cash is required. Nowadays, digital gold loans streamline the procedure considerably.

2. More Simple Eligibility Parameters:

The prerequisites for a gold loan are quite permissive in comparison to other forms of financing. Strong credit or income documentation is not a prerequisite. It is simple to use in order to raise cash for immediate needs, such as paying for higher education.

3. Higher loan-to-value:

People need immediate access to money in times of medical emergency so that they can receive prompt treatment. Getting a substantial amount of cash at the last minute is challenging. It might even make things more expensive. It is indisputably simpler to raise funds by using idle gold. Additionally, they have a high loan-to-value ratio (LTV).

4. Lower interest rates:

Since gold loans are secured, their interest rates are generally lower than those of other types of loans, such as personal loans, loans secured by property, business loans, corporate loans, etc. In case of a crisis, a lower interest rate might appeal to borrowers. The total repayment amount is consequently decreased, enabling more efficient debt management. 

5. Easy Repayment Options:

With a gold loan, borrowers have the flexibility to make interest and principal payments as needed. For instance, in some gold loan plans, borrowers can make only interest payments initially, and then make up the difference at the end of the loan term. On the other hand, they have the option of paying the entire amount at once. 

SahiBandhu CEO added that along with the aforementioned benefits, gold loans offer no end-use restriction. Because of this, it is among the best means of financing in times of need, whether for a family or a personal emergency. Numerous households in India possess gold, whether in the form of jewellery or coins.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.