Love of Indians for gold is out there- nobody is aware of the fact that Indians love their gold jewellery like their family members. In every Indian family, you will have a nominal amount of gold jewellery which they must have purchased at a wedding or a festival. Gold is not only used as jewellery but it can also be used during the financial crisis.
The gold loan comes as a rescuer if a person is facing a financial crunch. The gold loan can be seen as a traditional loan which is being used for many years now, even before home loan, personal and loan against property came into the market. Gold loan is a secured loan, meaning a borrower will have to keep a gold ornament as collateral, due to which the rate of interest is low and minimal documentation is required. No matter how many benefits a gold loan has there are few myths about gold loans which need to be debunked.
- Banks also offer gold loans: People who do not have much knowledge about the financial services believe that gold loans can only be availed from the jewellers or jewellers hop. However, this is completely untrue. The first and foremost myth regarding gold loans is that only jewellers and jewellery shops offer it. Gold loan is offered by the public as well as private sector banks and also by Non-Banking Financial Corporations (NBFC). Opting for a gold loan from banks or NBFC is the best option because it is secure, your gold will be kept in a locker which is safe. The gold is not only safe with banks but they also offer lower interest rates than jewellers.
- Your gold is safe: Do not worry about your gold ornament which is kept as collateral. When you borrow money from a bank against your gold, your gold will be kept under vaults which have hi-tech security arrangements. To ensure that your gold is safe and you receive exactly what you deposited at the end of the tenure then you should take a gold loan from a reputed bank who have received excellent ratings from the rating agency. Financial institutions like Muthoot, Manappuram, HDFC, SBI, Axis are famous for offering gold loans at competitive rates.
- Gold loan has a lower interest rate: It is untrue that gold loan interest rates are low forever, as interest rate keeps on changing from time to time depending on market conditions. Repo rate impacts the interest rate on loans, higher the repo rate means higher the interest rate and lower the repo rate means lower interest rate. The interest rate offered by every lender is different and the interest rate for every borrower is also different. The interest rate for borrowers depends on the borrower’s profile like credit score, monthly income and type of lender. Always remember that the interest rate for a gold loan will be less when compared to a personal loan or an unsecured loan just because it is a secured loan.
- Traditional gold ornaments can not be used: For a bank the quality and quantity of gold matters not the age of the gold. Some people have a perception that their traditional gold jewellery cannot be used at the time of a financial crisis, which is untrue. The government and Reserve Bank of India have issued guidelines to take a gold loan which is regarding the quality and not the age. The criteria about the quality are that the gold ornament should be 18 karats and above and pure.
- Gold loan process is easy: Some people have a notion that availing a gold loan is a time-consuming process. It is not true because the process to avail a gold loan is a hassle-free process and minimum documents are required to avail a gold loan. The application requires few basic documents like Aadhaar card, PAN card and income statements and after verification, the loan amount is disbursed in applicants account within a few days.
- Bottom line: If you need immediate cash you can apply for a gold loan without any fear as all the myths have been cleared about the gold loan.