What Are The Benefits Of Having A Collateral-Based Loan Like A Gold Loan?

Banks and Non-Banking Financial Companies (NBFCs) are sanctioning many loans on a day-to-day basis, and gold loans are among the many other loans with inexplicable and astonishing features. The primary reason for gold loan’s vast popularity and imperial trust is because of the collateral and the security the bank or NBFC provides for that. A personal loan is an unsecured-no collateral, a car loan is secured with many procedures, and a home loan is secured, but the collateral is your house. Like these different loans have different aspects that aren’t always the best for us. 

But in a gold loan, the loan is secured, and the collateral is your gold article. Gold is something that Indians always have and always are fond of and have an abundance of usage. People have lockers and safe boxes in their homes full of gold ornaments or jewellery, and it is nothing unusual here. Mainly, it makes a good asset for the financier and uncomplexed collateral for the borrower. Banks and financial institutes prefer gold loans and find it easier than other secured loans with immobile assets like land or commercial properties. The gold pledged is given complete security and assurance for its safety by the bank or NBFC. So one doesn’t need to worry about it being lost or misplaced by the lender. 

The gold loan amount sanctioned is a maximum of 90% of the gold’s value by the bank or NBFC. The value of the gold depends on the purity and the weight of the gold. The minimum purity requirement is 18k, and the maximum is 24 k. The value also depends on the rate of gold on that particular day. The bank or NBFC, after considering all these estimates, the value and grants you the loan amount based on their LTV value, whereas unsecured loans usually have fixed amounts like Rs25 lakh or Rs40 lakh as loan amount, so availing the money you want might be challenging in them, but a gold loan’ loan amount as mentioned depends on the value of the gold alone. 

The loan is usually availed for a certain period, which the financiers term as tenure. The tenure of the gold loan varies from 3 months to 3 years in most banks and financial institutes. You can choose the tenure you want. The term is compact, which is another boon. The gold loan interest rate is the most critical aspect of a loan. The interest amount has to be paid by the borrower every month on time for the loan availed. Failing to do so will add interest on top of the existing rate. Further defaults in payments might result in the bank or NBFC auctioning your gold. So paying the interest on time is extremely necessary. The gigantic advantage in secured loans like a gold loan is the low-interest rate, unlike unsecured loans, which charge incredibly high interest. Still, for their non-requirement of collateral, a gold loan has the least amount as a monthly instalment payment. The rate starts from 7% per annum and goes as high as 20% per annum. A farmer with agricultural land in their name can avail of the loan with even less interest. Also, collateral-based loans or secured loans don’t look after the CIBIL score as keenly as for an unsecured loan. A gold loan doesn’t need a credit score, so even if you have a poor score, you can still avail of the loan, which is another benefit. 

Banks and NBFCs also charge separately for the processing and approval of the loan application. The charge is known as a processing fee and goes up to 1% of the loan amount. Although, Some lenders charge NIL. The prepayment or pre-closure fee is incurred if the borrower closes the loan account before the actual maturity date. The charge depends on when the borrower closes the account. If it is in the early or ending days, the charge is NIL; else, it is 1% of the outstanding loan amount. The benefit here is most unsecured loans charge up to 2.5% as processing fees and upto 6% as foreclosure charges. The rates are incredibly high and unnecessary. 

Manappuram gold loan is a highly renowned gold loan with billions of customers. The bank offers the best deals in the market and is exceptionally trustworthy.

Also read:-  Step by step Instructions to Defeat Personal Loan burden

Gold Proved To Be Lifesaving For Banks During Corona Period

It was pretty obvious that without income people were hesitant to invest their money anywhere and as people stopped investing, the loan processes stopped but in these times gold loans stood out and helped banks and people to float through the high waves and survive. And during these tough times, every organisation, the institution has suffered, including banks. It was like a vicious circle in which everyone was trapped. People stopped taking loans due to these shortages of money and did not invest it anywhere.

But how come when people were not taking any other types of loans, they were still taking gold loans? Here’s the reason for it, as we know that gold loans are short term secured loans that means that they can be taken for some time with flexible terms and conditions and can be the best option for having fulfilled the immediate need for funds. So, it can be used for the best use for both banks and the people fighting through these tough times. Despite this, there are many other benefits of gold loans.

Let us discuss some of the other benefits of gold loans to have a better knowledge of these, as given below -

Credit score: 

As we know that it is important to have a good credit score equivalent to 700 or above if you try to apply for any loan, but if we talk about gold loan it does not carry a lot of value because they are short term secured loans that require a collateral to be deposited and usually it is opposite in case that of gold loans, people opt for gold loans to improve their credit score. A not very good credit score can be covered in gold loans as collateral plays a major role. That is why banks and lenders don’t really look up the credit score.

Repayment tenure: 

The gold loan is as we know a short-term loan, and its repayment tenure is also accordingly short only, ranging from 3 months to 3 years depending on the loan agreement between the borrower and the bank or the moneylender. The tenure should be fixed keeping in mind the Gold Loan Interest Rate so that there is ease in paying the monthly instalments. The lenders might extend the tenure if you tend to have good relationships with the bank or lender. So, you should consider all these points before opting for any one bank or lender.

Processing fees: 

Most of the banks and lenders don’t charge any processing fees while the other banks and money lenders keep their processing fees quite less and transparent, it can be up to 1%-2% of the total amount of the loan, while some might charge a certain percentage of the whole amount of loan whereas others might charge as low as ₹10 onwards, therefore one should first compare, negotiate and then make the decision of selecting the bank or lender offering the most convenient processing charges as even the slightest change in processing fees can make your whole amount of gold loan change significantly.

These are the benefits that gold loans offer to the customers and the banks and lenders and therefore we can say gold proved lifesaving for banks during the corona times.

If you have heard a little about gold loans, you must have heard about Gold loan by IIFL.They are famous for their services in the line of gold loans as they have been continuing to offer their customers a trustworthy service with a lot of schemes that make it more attractive for their customers. They offer gold loans with a flexible tenure, a rate of interest that suits everyone’s needs and desires. They have been known for delivering such services for years. They offer loans with minimal documentation and transparent processing fees which makes it easier for people to rely on them.

Advantages Of using A credit card

 

Credit cards have more than many advantages for users these days. It is the most convenient mode of payment. One can apply for credit cards at almost every bank and non/banking financing companies(NBFCs). The demand for credit cards is increasing every day. The documents required for availing of credit cards are address proof, identity proof, employment proof, salary slip, income proof, income tax documents, good credit history and score and many more as demanded by the financing institutions. With the growing economy credit cards have become a necessity for all. 

Credit cards have changed the purchasing power of a person. It has emerged as one of the most beneficial financing tools. It is a type of payment against the line of credit. A credit card allows you to purchase a wide variety of things and pay later for them. Credit card bills can be paid monthly through EMIs. It has helped you to finance a wide variety of goods and services. If used responsibly it can be of great help to the user. 

Bank Of India credit cards can be applied easily online as well offline. The bank offers a very attractive interest rate on credit cards. The credit card bills can be repaid in monthly installments as per the convenience of the users. The bank offers various credit card options as per the convenience of the users. For more information, one can visit the online website of the bank. 

A Credit Card can be very much useful for people as it has various advantages. Some of the advantages of using a credit card are listed below:- 

• Paying for purchase over time:- You can purchase the items you want and pay for them later. The credit card bills can be paid later as per the convenience of the user. Carrying a credit card in today’s time has made a lot of things easier. 

• Credit card rewards:- By using a credit card we can earn so many rewards and also cashback. These rewards can help us save a lot of money. It is the biggest perk of using a credit card. 

• Fraud protection:- Credit cards provide us with fraud protection. It is safer than any other card. It offers Virtual account numbers you can use while making over-the-phone or online purchases.  The virtual account number is provided for safety. One can easily use a credit card as it very much safe and secured. 

• Travel benefits: Many credit card also provides extra travel benefits. It provides a handful of features that can help you save money the next time you're traveling. This feature might include auto rental collision damage waiver, trip cancellation or interruption insurance, baggage delay insurance, trip delay reimbursement, free airport lounge access, a free checked bag, travel statement credits and many other travel benefits. 

• Return Protection: This policy may enable you to return your purchase for a refund even when the retailer doesn't allow it. This benefit can be used while purchasing. It usually lasts up to 3 months depending on the financing company you choose. 

• Credit Score: Credit card help you to increase your credit score. If you have a good credit score you can also avail loan on your credit card in future. The credit card helps you in maintaining a good credit history. 

• Universally accepted: One of the major advantages of using a credit card is that it is accepted universally. One can use a credit card worldwide. It is the easiest and convenient mode of payment. 

Conclusion

A credit card has become one of the most popular modes of transactions in modern times. It has various benefits to offer to its users. People are preferring credit more than other cards these days. There are various perks of using a credit card. Experts believe that in coming times credit card will be the most used card. As it is a financing card it has increased the purchasing power of the user. A credit card can be applied for in almost every banking sector and non-banking financing companies(NBFCs). For more information regarding credit card, one can check the online website or visit the nearest financing company. 

Must Read-Can An Unemployed Individual Get A Car Loan In Indi