7 Amazing Benefits Of Taking A Gold Loan
05 May 2022
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Almost no auspicious occasion or family function is complete without gold jewellery. In fact, gold is also one of the most precious gifts to pass on to your descendants. But the value of gold doesn’t simply end there; did you know that you can also get a loan against gold jewellery/Ornaments? In fact, the gold loan sector has grown over the past few years in India and looks set to prosper even more. As gold loans are a secured form of debt, they are quite beneficial for the borrower as well as the lender. To help you understand more about this form of borrowing, here are 7 benefits of taking a gold loan in India:
• Quick turnaround time
The time taken by the lender to sanction your loan after you have completed the application process is called the turnaround time. By offering gold as Security, you essentially give a guarantee to the lender about the repayment of the debt. Hence, lenders are known to approve and sanction gold loans much more quickly when compared to other forms of debt. Thus, you can get an instant gold loan and meet your emergency expenses with ease. TAT for Gold Loan in Bank of Baroda is 15 minutes.
• Relatively low interest rates
The interest rate charged by lenders is usually proportional to the risk they bear for giving you the loan. Consequently, unsecured loans usually require you to pay a higher rate of interest. However, when you procure a loan by offering gold as security, the risk borne by the lender reduces significantly. Hence, loan providers charge relatively low interest rates when compared other forms of debt such as personal loans or business loans. This is one of the biggest gold loan benefits to note.
• Low processing charges
If you procure a loan against property, the bank will have to first check the valuation of the property and ensure that it is not a part of any major legal issues. This verification process ca be time-consuming and cause the bank to bear a few ancillary costs. Thus, lenders levy processing charges to cover such expenses. However, when you procure a loan against gold, the loan provider only needs to check the purity of the metal along with its market value. This reduces the time and hassle involved in the collateral verification process. Hence, most lenders levy zero or minimal processing charges on gold loans.
• Zero prepayment charges
Nobody likes to stay in debt for an extended period of time, especially if the loan does not offer tax benefits. Now, while you can avail of tax benefits on the interest paid on gold loans for business purposes, the fact is that not many businesses use gold as an asset. If you are taking a gold loan for personal reasons, you do not get to enjoy any tax benefits. Thus, it is only logical to pay off your debt as quickly as you can. Understanding such concerns, prominent banks in the country do not charge any prepayment penalty on gold loans. Bank of Baroda is one such major bank which charging prepayment charges in Gold Loans.
• No requirement for proof of income
Lenders usually require you to furnish some proof of income to understand your repayment capability. However, when you offer gold as collateral, the lender gets the assurance of the repayment of the debt. This is because, if you fail to repay the loan, the lender can simply sell off the gold pledged by you and earn back their capital amount. Hence, one of the best gold loan features is that lenders do not require to furnish an income proof to approve your loan application. As a result, gold loans can be quite useful for people who do not have a source of income but require finances to tackle an emergency. So, if you are a homemaker or starting out as a freelancer, a gold loan might actually prove to be the best option to get simple and uncomplicated financing for your needs.
• No impact of bad credit history
Your CIBIL score reflects your creditworthiness. It is a numerical value that shows how efficiently you can manage your debts. Having a low CIBIL score can make it hard for you procure credit and, in most cases, increase the interest that is levied by the lender on the debt. However, if you offer gold as security, lenders do not require you to have a good credit history. This is because, if you fail to repay the debt, the lender can sell the gold pledged by you and earn back their capital amount.
• Higher LTV ratio
LTV ratio, or loan-to-value ratio, is the portion of the collateral’s market value that the lender can offer you as debt. For example, imagine you wish to buy a house that is worth Rs 1 crore. To finance your purchase, you procure a home loan from a lender who has an LTV of 60%. Consequently, the lender would only provide you Rs 60 lakh as the principal amount, while the remaining Rs 40 lakh would have to be paid by you. As it is evident, a lower LTV will reduce the loan amount that the lender can offer you. However, lenders who offer gold loans have a higher LTV.
Finally, once you give your gold to the lender as security, it is their responsibility to keep the precious yellow metal safe. Hence, all the gold that is taken by the lender as collateral is stored in a secured vault. Thus, you do not have to worry about your prized possession being stolen or misplaced. Once you repay the debt, the gold is returned to you safely.
Looking for a gold loan? Here is why the Bank of Baroda gold loan is the right choice!
Bank of Baroda is one of the prominent and trusted names in the banking sector in India. The BOB gold loan is one of the best ways for you to procure funding on terms and conditions that are suitable for you. We offer three types of gold loans, retail gold loans, Priority Gold Loans agri gold loans. While agri gold loans aim to help the farmers of the country to fund agricultural and allied activities, retail gold loans can help you meet your emergency expenses. We understand the importance of gold loan and have made the entire application process easy. We also offer a low interest gold loan so that you can get the finances you need without too much worry. We also offer you an online gold loan calculator that can help you understand the loan amount you can procure from the comfort of your home.
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