Traditionally, gold has held a place of pride in Indian households. It has been an essential part of celebrations and family rituals for Indians.
However, people are open to explore the options of monetising their gold now.
Almost everyone faces a cash crunch due to salary cuts, sudden medical emergencies, business slowdowns, and layoffs during the coronavirus pandemic.
Gold emerged as a frontline instrument to meet urgent cash requirements in the form of loans against gold.
According to data, there was a 20% rise in the gold loan applications sanctioned by non-banking financial institutions during the third quarter of 2021-22.
Top Reasons For The Increase In The Demand For Gold Loans
There are several reasons behind the increase in the demand for gold loans. Here are the top ones.
- Attractive interest rates: Since gold loans are secured loans, lenders charge a relatively lower interest rate on them than other loans like personal loans. The difference in the interest rates affects the cost of the loan drastically. Gold loans at Muthoot FinCorp start at only 11.99% per annum, making them much more affordable than other loans.
- Quick processing: Usually, lenders take up to a week to process a loan application since they conduct detailed background checks and verifications of the loan applicant’s documents. The processing time for a gold loan is much less than other loans since the lenders have the assurance of the borrower’s pledged gold. Muthoot FinCorp processes a gold loan within minutes of the customer’s document verification and gold valuation.
- No restriction to end use of loan amount: Other loans like housing loans, education loans, or auto loans come with fixed end uses of the loan amounts. In the case of gold loans, the borrowers have the freedom to use the loan amount as per their requirements. So they can use a part of the loan on one thing, like home renovation, and another part on something else, like business expenses.
- Minimum documentation: Borrowers have to submit several documents like income proofs, Income Tax Return statements, salary slips, rent agreements, etc. while taking other kinds of loans. It can be very time-consuming, and people may not have all the required documents ready. However, the documents required to take a gold loan are minimum. Customers can get a gold loan from Muthoot FinCorp by giving only their identity proof and address proof as documents.
- Flexible repayment options: Gold loans have the unique feature of paying only interest. The borrower can pay only the gold loan interest during the tenure of the loan and can repay the principal amount at the end of the loan tenure. This feature is beneficial for a borrower facing a temporary financial crunch but who expects surplus cash by the end of the loan tenure. Borrowers can also repay the loan on manageable monthly instalments or bullet payments with Muthoot FinCorp. Use a gold loan calculator online to check how much loan you can get and at what interest rates and repayment terms.
- No dependency on credit score: Lenders look for a good credit score, preferably between 750 and 900, while sanctioning a loan. An individual with a low credit score and no credit history often finds it difficult to get a loan. Even if he gets a loan, the interest rates applicable are too high. Gold loans are secured loans and the lender has the customer’s gold with him. Thus, he does not require the customer to have a credit history or a good credit score. The customer can take a gold loan and repay it with discipline to build a good credit score and credit history.
- No foreclosure charges: If the borrower wants to repay a loan before the end of the loan tenure to save on paying unnecessary interest, the lender charges a prepayment fee from the borrower. This fee can be as high as 2-3% of the loan amount. Muthoot FinCorp charges zero prepayment charges after three months of sanctioning the loan amount.
Gold loans are in high demand due to the easy terms and low-interest rates they offer. Use the gold loan calculator on the website of lenders to calculate the loan eligibility, amount of loan, the interest rate applicable, and the number of instalments you need to pay for your gold loan.