When you take a gold loan, lenders do not look at your credit history and will only consider the purity of the gold ornaments or coins. Moreover, these loans are easy to avail and require minimal paperwork.
Lenders usually offer a maximum of loan against gold of the current market value of your precious metals. This reduces both the lender’s and borrower’s risk, thus lowering interest rates and fees.
Collateral
When it comes to loan collateral, gold bullion is an increasingly popular option. This is because gold offers a high level of liquidity and can be used as a replacement for other forms of loan collateral when needed. It also tends to maintain its value over long periods of time, despite price fluctuations.
A collateral loan against gold is a great way to secure short-term loans you know you can repay. It is based on the value of your gold and not your credit score, and typically has lower interest rates than unsecured loans. It also does not require a credit check, making it easier for people with poor credit scores to qualify.
JM Bullion is partnered with Collateral Finance Corporation (CFC) to offer this unique service for our customers. CFC uses in-house valuers to appraise your bullion holdings and determine the loan-to-value ratio. Then they will give you cash in exchange for your precious metals, which is stored safely until your loan is repaid.
Interest rates
While most of us think of gold as an investment, it can also serve as a source of immediate cash. Many banks and non-banking financial organizations (NBFCs) offer loans against bullion, which provide temporary capital for those who need it. These loans are based on the value of the bullion and have shorter disbursement periods than traditional bank loans.
The lender will verify the purity of the bullion and then determine a loan to value ratio, which typically ranges from 50-70% of the total asset value. This means that you can leverage the value of your gold in a short amount of time, while still keeping it as an appreciating investment. The gold will be vaulted by the lender for the duration of the loan, but you will maintain ownership.
One of the best things about this type of loan is that it does not require a credit history check. However, failure to make payments on a timely basis can damage your CIBIL score and limit future lending opportunities.
Repayment options
Gold loan tenures are flexible and can be extended to suit a borrower’s needs. They also offer multiple repayment options to suit a range of budgets, including repaying the interest and principal amount equally in monthly instalments (EMI), paying only the interest for the duration of the tenure, or making partial payments based on funds available throughout the tenure. Reputable lenders also charge minimal or zero prepayment charges for a gold loan.
Unlike home and auto loans, which require extensive documentation, gold loan applications are usually processed in less than 30 minutes. This is because the lender only has to confirm the purity and value of the pledged gold. In addition, most lenders do not ask for income proof or credit history, as they are assured of the repayment capacity and safety of the gold collateral. This makes gold loans more accessible than traditional secured loans. They are an excellent option for borrowers who need cash to cover urgent expenses.
Fees
In a loan against gold, you pledge your precious metal as collateral for a short-term credit facility. In exchange, you get money that is equal to the value of your gold. The process is usually quick and convenient. You gold buyer can also receive a higher loan amount than you would with other forms of collateral, such as property or personal loans.
Generally, banks and NBFCs offer low-interest rates for gold loans. This is because the loans are secured by physical gold, which reduces the lender’s risk. Additionally, many lenders allow borrowers to pay only the interest on their loan for the entire repayment term.
Conclusion
Unlike other loans, you don’t need to provide income proof or have a good CIBIL score when applying for a gold loan. However, if you default on your payments, the lender will auction your gold item to recover the outstanding balance. This is why it’s important to make timely equated monthly instalment (EMI) payments.
