The outbreak of Covid-19 has caused severe cash crunch for people in India. While it is always important to save so that you can use it during shortage of cash, one of the ways through which you can raise cash during Covid-19 is by availing a gold loan. We will have a look at how availing a gold loan can solve your cash crunch problem to a large extent.
What is a gold loan?
Gold loan is a type of loan which you can avail from a bank by pledging your gold ornament as collateral. Depending on the amount of gold you have, you can avail a gold loan and use the amount to take care of your financial requirements.
However, there are various reasons why gold loan is a good option if you are looking to raise cash.
- Gold loan is cheaper than personal loan
A personal loan does not require you to pledge anything as a collateral. However, the interest rate charged by the bank for a personal loan in comparison with a gold loan is higher. Also, if you apply for a personal loan, the lender may charge a processing fee. However, for most gold loans, the bank may not charge any processing fee. Since gold loans are secured loans, it is cheaper in comparison with a personal loan and hence a better option to avail if you are looking to raise cash.
- Much more secure
The loan to value for a gold loan can be up to 75% of the value of the gold ornament. This means that for every Rs.100 worth of a gold ornament pledged, you can avail up to Rs.75. This means that even if the price of the gold falls in the market by as much as 25%, you will still have enough cash to take care of your needs.
- No need for credit score
While applying for a personal loan, your credit score plays a very important role in the bank approving or rejecting your application. If your credit score is low then either your application for a personal loan gets rejected, or the bank charges a higher interest rate. However, in case of a gold loan, your credit score does not matter as long as you have gold ornaments to pledge.
- Flexible tenure
You can choose the repayment tenure as per your convenience. You can choose a tenure which you feel will be suitable for you to repay the loan amount to your bank. However, based on the repayment tenure and the loan amount, the bank will charge an interest rate.
- Repayment option
You can choose how you wish to repay your loan amount. While you can repay a specific amount that is the sum of principal and interest on a monthly basis in forms of EMIs, you can also repay the loan by paying a lumpsum amount to the bank. How you choose to repay your loan will depend on your ability to arrange funds and your other financial requirements.
- Takes less time for the loan amount to be disbursed
Once you have pledged your gold ornament and submitted the necessary documents along with the application form, the bank may not take more than 72 hours to disburse the loan amount to your bank account. This means that you can get your loan amount at the earliest and take care of your financial requirements.
Before you apply for a gold loan, make sure you compare the various gold loan schemes available to determine the scheme which you feel will be suitable for you. Once you have compared and decided on the scheme you would like to avail, you can apply for it online either on the bank’s website or by offline by visiting the nearest lender’s branch.