A gold loan is not a new phenomenon for Indians. People have been performing the process of exchanging goods for ages. The only difference here is that the borrower pledges the goods and receives money against them. It has been the main source of acquiring funds since the earliest days of financing but it has gained more attention recently with the rising gold prices.
The other loan options offered by the banks or NBFCs (Non-Banking Financial Companies), such as personal loans, auto loans, education loans, etc. have lengthy procedures due to the risk factor involved in granting these loans. Hefty paperwork is required to be processed by the banks or NBFCs in order to check if the applicant is eligible for the said type of loan.
A gold loan is a 100% secured loan. It is given against a gold article (an ornament, coins, etc.) which reduces the risk for the lender and the lender does not even consider the credit history of the applicant. This makes the process of applying for a gold loan simple and swift.
The applicant has to provide the KYC documents and the signed application to the lender. Once the lender has verified the documents and evaluated the purity and weight of the gold article to be pledged by the applicant, the lender can finalize the loan amount to be granted based on the gold loan per gram rate along with the prevailing gold loan interest rate.
This process hardly takes 30-45 minutes to be completed. In case the applicant has opted for a home assessment then it may take a few days otherwise it is a matter of a few minutes to an hour. This is the reason why gold loans have become more attractive for borrowers.
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