InvestorQ : What is the advantage of taking a gold loan over other types of loans?
Suresh Patil made post

What is the advantage of taking a gold loan over other types of loans?

Pratik vyas answered.
3 years ago

A gold loan is when a company gives you liquid cash while keeping your physical gold as a collateral with them. It is usually a short-term loan availed of by individuals who need money on urgent basis.

There are many advantages of opting for a gold loan over other forms of loans:

Lower rate of interest: As lenders hold your physical gold (in the form of coins, bars, biscuits or jewelry) as collateral against the amount they have lent you, they charge you a relatively lower rate of interest as they see your loan as a low-risk loan.

The interest rate charged also varies depending on how much you want to borrow in relation to the total value of the gold that you have pledged. If the loaned amount does not exceed 50-60% of the total value of gold pledged, then you get charged a lower rate of interest. In contrast, if the amount that you’re borrowing is higher (vis-à-vis the value of gold), the interest rate will be relatively higher.

For example, if you pledge Rs. 2,00,000 worth of jewellery and borrow Rs. 1,00,000, the you can get a lower interest rate on the loan vis-à-vis what you would get if you borrow a higher sum, say Rs. 1,75,000.

Money in your hands, quickly: As lenders hold your gold valuables as collateral against the amount they’re lending you, gold loans are some of the quickest loans to be sanctioned across the industry. Unlike other loans, gold loans don’t check your credit reports or scores. In fact you can go to a loan company, give them your gold belongings and get your loan approved in a matter of minutes. And this includes the process of the loan company verifying the purity and value of your gold.

No salary slip needed: Getting a gold loan is not only quicker, it is also easier. The lender doesn’t ask you to submit a salary slip or proof of income. Hence, it is one of the best financing option for an individual who is unemployed or doesn’t have a solid credit score.

It must be noted, however, that lenders might ask for a salary certificate if you apply for a loan above a certain amount.