Interest Charges on Gold Loan

  • Gold Loan
  • 6 Months ago
Interest Rate Charges on Gold Loan
HIGHLIGHTS

  • Interest charges on Gold Loan
  • Benefits of taking Gold Loan
  • Advantages of Gold Loan Versus Personal Loan
  • Conclusion


What are the Interest Charges on Gold Loan?

According to the World Gold Council (WGC), Indian households hold close to 25,000 tons of gold, the largest private reserve in the world. Given the magnitude of possession, one would assume that the yellow metal was being put to good use as an investment option.

Unfortunately, not many Indians use gold to raise funds when needed. Women make a beeline for gold showrooms on Akshaya Tritiya and Dhanteras to buy jewellery. But most keep the gold locked away in cupboards only to be worn on special occasions like weddings. Most Indian families prefer to keep gold safe due to the sentimental value attached to it. The underlying message -  gold in India is not monetized despite the huge potential it offers as an investment vehicle.

Incidentally, the number of financial companies that offer gold mortgages in India has significantly increased post-liberalization. People eager to invest in gold no longer need to depend on pawnbrokers or money-lenders as professionally run gold mortgage companies offer easy mortgages at attractive interest rates. Most of these companies are backed by credible financial institutions and transact with transparency and integrity.

What is a Gold Loan?

Gold loan is an easy option where one can borrow money by pledging gold as collateral. The mortgage amount is based on gold loan per gram against the total gold pledged. This is an incredibly pragmatic option to fund your personal and business requirements. Funds from gold loans are generally used to meet expenses related to medical emergencies, education, weddings, business expansion, or other urgent financial needs.

Benefits of Taking Gold Loans

Let us understand the advantages a gold loan offers: 

  • Quick Approval & Processing: Gold loans are easy to secure since they are backed by physical gold. Today, with the advancement of technology, there are several companies in this space that allow individuals to apply for gold loans online. A user can receive an estimate of the mortgage amount and EMIs instantly by providing details online. However, one would still have to be physically present at the company to pledge the gold. 
  • Lower Interest Rates & Fees: The interest rates associated with gold loans tend to be much lower and are directly related to the gold loan tenure and the mortgage amount. In most cases, the processing fee is either minimal or nil. Further, you do not need a good credit score for a gold loan, and the chances of the mortgage being rejected are also low. 
  • Gold Remains Completely Secure: Pledging your gold is safer than keeping it locked at home. Most gold loan companies have secure vaults where they store the pledged gold. Customers need not worry since the gold remains in trusted hands under lock and key. 
  • Seamless Documentation Process: A regular bank loan requires extensive documentation. However, gold loans are approved and disbursed on presenting a few specific documents. In most cases, gold loans are disbursed in a matter of hours; in some cases, even minutes. 
  • Easy Repayment Options: Individuals availing gold loans are given multiple repayment options. They can either repay in monthly instalments or can opt to pay only the interest on the mortgage while choosing to pay the principal only when they close the loan account and get their gold back. 
  • Quick Transfer & Loan Renewal: At Shriram Finance, borrowers can get the loan amount transferred directly to their bank accounts. The company also offers individuals the facility to renew a loan at the end of the tenure. 

A company that has made quite a name for itself in this industry is Shriram City Union Finance. The company was established in 1986 and is one of the most prominent names in the retail financing space. Shriram City has increased its reach with its seamless online process for Pledged ornament loan, you can apply online with few click and the nearest branch can contact you instantly for further guidance. Click Here to apply now!

Advantages of Gold Loan Versus Personal Loan

If you still have nagging doubts about why take gold loans when personal mortgages are easily available at banks, here are a few reasons why gold loans are better:

  • There are no pre-payment charges generally associated with gold loans.
  • The rate of interest on a gold loan is much lower than a personal loan.
  • The processing disbursement of a gold loan is quicker.
  • Disbursement of the mortgage depends only on the value of the pledged gold. Your income or previous credit score is not considered.
  • In case, the mortgage is not paid within the stipulated time, the financial company would auction the gold to recover the mortgage, but will not use any arm-twisting tactics for recovery.
  • Borrowers can choose to pay only the interest for the tenure of the mortgage and repay the principal only when they wish to close the mortgage and get their gold back.

Conclusion:

In India, gold is considered a prized possession and a status symbol. The emotional value attached to gold is quite high, this can make it difficult for families with a traditional mindset to avail a gold loan against jewellery. But, if we want to move with the times, we must ensure that our assets contribute to our financial well-being. Keeping gold locked away at home or in a safety locker does not benefit you. We must ensure that we monetize gold to meet our immediate need for capital. 

Also, pledging gold should not be a stigma and need not be equated with prestige and social status. It may seem amusing, but we come across people who consider pledging gold an indication of a financial turmoil within a family. This thought process comes from archaic beliefs when a family would only pawn or sell jewellery as a last resort to secure funds. It is time to do away with such belief systems and make the best use of the assets we own.   

Armed with this information on the benefits of pledging gold, you can confidently reach out to a gold loan company. That said, to be safe, you can check the schemes offered by different companies before opting for a gold loan. You could check the interest rates, tenure of gold loan, loan-to-value ratio (LTV), and the security measures adopted to protect your gold. LTV is a critical factor to consider when availing gold loans since it determines the loan amount you will receive against the pledged gold. In most cases, the mortgage amount tends to be 75% of the value of the gold. At Shriram Finance, we would advise you to make an informed decision when you opt for a gold loan.