What is a gold loan all about? A lot of people do not understand how getting a gold loan works or how it works. A gold loan is a secured loan where the borrowers keep their gold ranging from 18k to 24k. This gold is usually kept with a bank or a financial institution as security and availed capital against it.
Sbi gold loan is a similar concept to a mortgage loan where the owners keep their house or property as a mortgage with the bank and takes a loan to sort out emergency issues. Not everyone should opt for a gold loan. Only for those with short-term fund requirements, those with low credit scores, and those who have gold but are taking a personal loan.
The gold loan rate today is quite different from the previous one and the rate changes each day. Gold loans serve as a source of support when you need urgent capital. However, you need to know the type of gold accepted because most banks accept only gold jewelry. Also, the purity of gold provided as collateral should be between 18k and 22k.
How do Gold Loans Work?
A lot of us have one or two gold stocks up in one place, instead of keeping them, you can take them to the bank or any financial institution so that they can help you protect them. A gold loan rate is among banks’ profitable loans as banks are free from the worry of non-performing assets. The way a gold loan works is.
- Checking the quality: When you approach a financial institution for a gold loan, the first thing the institution does is to check the purity of the gold, and also the value of the jewelry.
- Know your customer: This is a norm given by the institution, where the banks get to know their customer’s details such as credit history, identity, and the importance of applying for a loan.
- Approval of gold loan: once the value and quality of your jewelry are confirmed. The loan terms are agreed upon by both the financial institution and the consumer.
Once the agreement is complete, the loan is approved and the amount is then credited to the borrower’s account. However, this process does not take up to take more than a couple of hours.
Is Taking a Gold Loan Safe?
Of course, it is safe, gold loans are considered a safe investment option. Although, physical gold may not yield great value or it may be very less. However, with gold loans, borrowers can make use of the cash for various expenses or emergency expenses. When we take about the best bank for a loan, SBI is a good option. They offer a low loan interest rate of 7.50% for a loan tenure of a maximum of 36 months.
Features of Gold Loan Near Me
Getting a good gold loan has several features and if you intend to get a loan from your gold, then you should know the features.
- It has a good interest rate and gold loans vary based on the purity of gold. So the higher the purity of gold, the higher the amount that can be availed.
- Haircut and loan to value ratio
- Tenure, a gold loan is generally a short-to-medium term loan where the tenure ranges from six months to 24 months. This means that it is not a long-term loan instrument.
- Loans are available to even low credit score holders
- The weight of stones and their value is not counted
Finally, as the gold is deposited with the bank as collateral, the bank can sanction a loan to the person even with a low credit score.
Benefits of Having a Gold Loan
Gold is considered to carry significant value and it is a source of potential capital for the future. However, not many know that gold can be used to fund any emergency like children’s education, medical expenses, business setup, and down payment for any purchases you made. Let’s look at the benefits of gold loans in this period.
- No impact of poor credit history
- Security of physical Gold
- Zero processing fees
- No-income proof to be furnished
- Minimal foreclosure charges
- Pay interest only option
- Comparatively lower interest rate
- Quick processing
The above lists are some of the advantages offered by a loan against gold and why it is important for everyone to make the most out of it.