What is Gold Loan?
As the name suggests this is the loan given against gold. Many nationalized banks, private banks and other financial companies offer this loan at attractive rates. Many go for this loan for short period to meet the requirement of their children’s education, marriage and other financial problems in the family. And others think that instead of keeping the gold idle at home or locker, loan against gold is the best option.Moreover with the rise in gold rates the demand from companies and banks offering such loans has raised.
Advantages of Gold Loan
- Gold loan doesn’t demand any certificate to show your salary or income and even no credit card history is required. Thus even unemployed and non working people can go for gold loan.
- One of the main advantages of gold loan is its low interest rates. Usually loan over gold is provided at the interest of 12-16% per annum and this is quite low.
- In rural areas Agricultural loan against gold is also available for agriculturist at very nominal rate of Interest of 7%-8%, proof of agricultural document needs to be provided.
- Gold loan is the most simple and convenient forms of loan because here all you need to do is pledge your gold with a bank or finance company and get upto 80% of the market value of the gold as a loan.
- Borrower will be given an option to pay only interest during the entire term and at the end of the tenure you can pay complete borrowed amount in single shot.
Best Alternative for Personal Loan
- If you closesly look at the gold loan interest rates in market, you would find them hovering around 12 to 15 per cent per annum whereas the personal loan rates range from 18 per cent to 24 per cent.
- Unlike any other unsecured loan, gold loan doesn’t require many papers, only few documents such as ID proof and address proof is enough to avail for such loan.
- In Personal loan you need to repay your loan using a fixed EMI spanning over a fixed period of time. And if you pre-pay any amount, banks charge you a pre-payment fees of about two per cent of current outstanding principal amount. This is not the case in gold loan. You can repay any amount and close your loan account anytime.
