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Business News/ Money / Personal Finance/  How do you benefit from taking a gold loan? MintGenie explains

How do you benefit from taking a gold loan? MintGenie explains

Gold loans are trending as prices of the yellow metal are going up, thus, allowing people to avail of the loan amount. The sheen of the yellow metal can be used for myriad purposes other than religious or ceremonial reasons.

Know the benefits of taking a gold loanPremium
Know the benefits of taking a gold loan

Ask 100 families in your neighbourhood if they have invested in gold, and you will find a whopping majority voting in favour of gold investments. Beyond just the religious connotation, gold enjoys support from Indian families relying on the price movement of the yellow metal to achieve financial independence in time. The prices of gold have now stabilized following constant ups and downs in the past few months. 

However, people today do not invest in gold for religious or embellishment purposes only. The idea behind putting money in gold is to benefit from its growing prices over a period, say a decade or more depending on your investment tenure.

Gold loan benefits 

The rising price of gold has prompted many inclined borrowers to seek loans against their gold deposits or investments. Depending on how one views investments, borrowers may offer their gold jewellery (including bullions, coins and ingots) and sovereign gold bonds (SGBs) as collateral for the loan amount. With so many kinds of loans available in the market, many people inquire whether taking gold loans is worth the risk.

Before we delve into why gold loans are becoming increasingly popular, let us look at the benefits of taking this kind of loan. These include:

Immediate availability of loan capital

How many times do we see gold loan companies professing quick loan availability sans any unwanted hurdles? Well, gold loans are approved quickly. This explains why they are the most sought-after kind of loan. Some lenders are also said to approve this kind of loan application within a few minutes, thus, allowing borrowers to avail of the loan amount within an hour or so.

Minimum interest rates 

Interest rates are rising globally, which is why borrowers are now apprehensive about seeking loans while existing borrowers are finding it difficult to repay the loan amount in time. A gold loan is a secured loan product with much lower interest rates than other unsecured loans. Low-interest rates ensure that debt repayments stay within budget. This also means that you can resort to debt consolidation and use the gold loan amount to get rid of the loan burden. 

No need for added collateral

With gold investments as collateral, lenders do not ask for more. Since lenders do not seek extra collateral, they offer loan amounts based on the value of the gold investments (including ornaments, bonds, gold mutual funds and exchange-traded funds).

 Free use of loan amount 

Unlike home loans wherein the amount must be used towards a home purchase or construction only or other loans wherein you must mention the purpose of filling in the loan application, you can use the gold loan amount for any purpose depending on your need(s). This means that the borrower may use the loan proceeds in any way they deem fit, without having to justify their expenses or purpose.

More liquidity

What use is gold if it is left lying in bank lockers? More than the decorative purposes, the sheen of this yellow metal can be put to good use by taking a loan against it, thus, adding to your liquidity as and when you need money. 

Zero paperwork

Gone are the days when the burden of paperwork made you fear submitting a loan application. Times have changed as the web has connected both borrowers and lenders online, thus, paving the way for a seamless loan application process. This suggests that very little paperwork is required to apply for a gold loan, thus, saving time and allowing for quick payouts.

Irrelevance of credit score

Ignore those who preach about credit profiles and the importance of having a good credit score. Gold loan companies are least interested in your credit score as long as you have the desired collateral to service your loan. 

The hesitation to keep gold as collateral for taking loans is long gone as more people are queuing up before lending companies to avail of the benefits of taking gold loans

We draw a comparison between digital gold, gold ETF and gold bonds. 
View Full Image
We draw a comparison between digital gold, gold ETF and gold bonds. 

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Published: 20 Mar 2023, 08:55 AM IST
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