Individuals have a strong emotional attachment to their precious gold jewellery. Therefore, they face an intense dilemma about whether they should sell their gold during the financial crisis. However, they can avail of gold loan benefits from a reputed financial institution to avoid the plight of selling the asset. This can help them prevent their complete detachment from the emotional ornaments. Therefore, individuals need to know why they should get a gold loan to increase their liquidity instead of selling the asset.
What is a gold loan?
Before going into the rationale for opting for a gold loan instead of selling the asset, individuals must have a basic idea about this type of credit advance.
A loan against gold is a secured credit advance. Individuals need to keep their gold as collateral to the lending institutions. After appraising their assets, those financial institutions inform their borrowers how much credit they can offer against those. Further, the borrowers get a repayment schedule containing the due dates to pay their instalments. After settling all the dues, individuals can release their assets from their lenders.
Reasons to opt for a gold loan
Here are the two significant reasons for which individuals should take a gold loan:
- Repossession of gold
Individuals can get substantial credit both by liquidating and mortgaging the gold ornaments. However, it is almost impossible to get the same gold ornaments back after selling them. So, to avoid this unnecessary circumstance, individuals can mortgage the same assets to financial institutions and opt for a gold loan. It will help them repossess their mortgaged gold ornaments after repaying is complete.
- Best financing option in an emergency
In an emergency, individuals need to manage their liquidity shortage quickly. There is a significant chance they will sell these valuable assets at a lower price than their actual value. Furthermore, finding a buyer in time of emergency can be challenging. So, to avoid all these, individuals can take a gold loan against those ornaments. This can help them with sizeable loan amounts. The lenders appraise the property properly and give borrowers nearly 75% of the fair market price of that gold. Thus, they can easily meet financial shortcomings without much hassle by availing of this type of credit advance.
Apart from this, gold loans offer numerous benefits to the borrowers, for which individuals can seek this option for liquidity instead of selling gold.
What are the gold loan benefits?
Following are the advantages of these gold-backed loans:
- Faster processing of loan application
Generally, the financial institution is lenient on the documentation process and eligibility requirements. This is because the lenders keep their physical gold with them. Consequently, the verification process is shorter in this loan.
- Instant disbursal of High loan amount
Getting a sizeable amount is one of the significant gold loan benefits. Most lenders offer a credit advance for up to Rs.1 crore on their loan against gold. Further, lending institutions do not take much longer to disburse the loan amount to their respective borrower’s bank accounts.
- Lower interest rate
The lending institutions take a significantly lower interest rate in this gold loan as it is less risky. However, the rate may vary across several financial companies. Furthermore, the rate also differs according to gold’s purity, the economy’s inflation rate, etc.
- Complete security of gold
When individuals take a gold loan, their precious ornaments stay under stringent security surveillance. The lenders take all the responsibilities of mortgaged assets. Moreover, in some credit advances like the Bajaj Finserv Gold Loan, borrowers can get an additional benefit of full insurance of their mortgaged properties.
Individuals seeking emergency finance through a gold loan must know which documents they need to keep handy while applying for this.
Documents required for a gold loan
As mentioned earlier, the documentation process is lenient in a gold loan. Still, they need to keep the following records ready while applying for this credit facility:
- Aadhaar card
- PAN card
- Driving license
- Rental agreement papers
- Voter identity card
- One Utility bill (Electricity bill, telephone bill, etc.)
In conclusion, individuals can be financially secure even without selling their favorite gold ornaments. They can easily tackle their temporary financial challenges by taking a home loan from reputed financial companies. Yet, one of the most significant gold loan benefits is reclaiming their precious ornaments after paying off the entire debt.
Author:- Vikas Choudhary