In times of financial need, people look for various types of loan options. One of the common ways to deal with financial challenges is through loans. While personal loans are a popular choice, many people are not aware of the benefits of a gold loan. This article covers gold loans in greater detail and explains how to get the best loan against gold schemes.
In a gold loan, borrowers keep their gold as collateral with a lender. In return, they get a certain percentage of the value of their gold as a loan for a fixed term. Once the tenure is complete and the borrowers have repaid the loan amount, they get their pledged gold back. Anyone between the age of 18 and 60 can apply for a gold loan.
A gold loan is sometimes referred to by other names such as loan against jewelry, loan against pledged jewels, loan against ornaments, loan against gold coins, or loan for high carat gold. A gold loan has many advantages over other forms of loan.
There are numerous gold loan benefits that many people are not aware of. The best gold loan schemes offer the following:
Lower Interest Rate
A loan against ornaments comes at a much lower interest rate than personal loans. Shriram City offers gold loan interest rates starting from 11.5% p.a., one of the lowest gold loan interest rates. These interest rates on loans against jewelry are very low compared with personal loans, where interest rates can sometimes go above 30%.
Lower Processing Fees
Another benefit of a loan against pledged jewels is lower processing fees. At Shriram City, the processing fees for a loan for high carat gold starts from 0.1%. This is super low compared to the processing fees for personal loans, which can exceed 4%. So, if someone takes a loan of 100,000, they will end up paying processing fees of 4,000 and get only 96,000.
No Need of Income Proof
One of the significant advantages of a loan against ornaments is that it does not require any income proof. This is different from personal loans, where the borrower's income and credit score play a big role in determining interest rates payable on personal loans. For borrowers with a weak credit profile, such as a low income or poor repayment history, the interest rate can go up to 36%. On the other hand, the borrower's income or credit history plays no role in determining the gold loan interest rate to be paid.
No Foreclosure Charges
Foreclosure means prepaying the loan before the term. A key benefit of a loan against gold coins is there are no foreclosure charges. If someone has taken a loan against jewelry for 3 years, and if they want to repay in 2 years, they do not have to pay any prepayment penalty. Borrowers can repay their outstanding amount and get their pledged gold back. On the other hand, personal loans come with foreclosure charges of as high as 5%.
Ease of Documentation
Unlike other loans such as housing loans or personal loans, loans against ornaments involve minimal documentation. One can get a gold loan with basic documentation such as identity proof, address proof, and photographs. This is a unique benefit of loans against high carat gold.
Safe Custody of Gold
While using gold as collateral for a loan, some people are worried about their original asset's safety. At times, people may use their traditional family jewelry, which has been passed on for generations, for taking a loan. However, when taking a loan against pledged jewels, you can be assured of the safety of the original asset. The gold is stored in lockers as per government guidelines. Additionally, lenders such as Shriram City also provide insurance cover for the same. This way, borrowers can be assured of the safe custody of their gold.
Insurance cover for the borrower is another unique gold loan benefit. If the borrower meets with an untimely death, the insurance cover pays off the outstanding loan amount. Also, the pledged gold is handed over to the borrower's family.
Flexible Repayment Options
A loan against jewelry offers flexible repayment options. Borrowers can settle the repayment through EMIs, which cover both the principal and interest obligations. In a non-EMI scheme, the monthly installment covers only interest obligations. Borrowers can pay the principal due as a lump sum at the end of the loan term.
Wide Range of Tenures
No two borrowers are the same, and different borrowers need financial assistance for different tenures. Shriram City's loan against ornaments can be availed for tenures ranging from 12 months to 36 months.
The loan to value (LTV) ratio determines how much loan you can get as a percentage of the total value of your gold. The best gold loan schemes offer a high loan to value ratio. Shriram City offers loans of up to 75% of the value of the gold pledged as collateral. This is among the highest loan-to-value ratios in the industry.
Loan against jewelry is among the easiest to avail. The borrower must simply provide the gold as collateral and complete the formalities with the basic documentation. As there is less assessment about the borrower's income or the credit score, this makes the loan approval process faster. The loan is credited to the borrower's account within a few minutes of approval.
Loan Renewal Option
While taking the loan, at times, borrowers may not be fully aware of the required tenure of the loan. For example, they may take a loan against pledged jewels for 12 months, but due to unforeseen circumstances, they cannot repay the loan within 12 months. In such cases, they can opt for a loan renewal and extend the term of the loan.
When taking a loan against jewelry, the gold loan interest rate is a huge determining factor. The lowest gold loan interest rate would mean lower EMIs for borrowers, and it can help in faster repayment of the loan. You can contact Shriram City with your requirements to understand the interest rate offered. Shriram City has branches [MK1] all over the country. You can share the details, such as the loan amount required and the type of gold (whether in the form of jewelry or gold coins) to be offered as collateral. In case you have received gold loan interest rates from other lenders, you can share those with the team at Shriram City. Based on your requirements, you will get a customized loan rate, which will be among the lowest gold loan rates offered in the market.
Shriram City Union Finance is India's leading provider of gold loans. Since 1986, Shriram City has been meeting the financing needs of diverse segments, including individuals and MSMEs. More than 40 lakh borrowers have relied on Shriram City for their financing needs. The company has a network of more than 900 branches spread all over the country.
Want to get the best loan against gold? Contact Shriram City now.