Gold Loans: What Are They And How Can You Get One?
If you’re looking into the different forms of financing, you might be wondering, what is a gold loan?
This is a secured loan option that uses your gold possessions as a form of collateral.
The lender will usually base the loan amount on a certain percentage of the gold’s worth. Usually, the amount given is up to 80%. Moreover, it’s based on the current market value and on the overall quality of the gold itself. Its tenure is typically for a period ranging from one to five years.
Major Benefits Of Gold Loans
These loans can be taken out for a variety of reasons. People are attracted to this financing option in order to afford a vacation, wedding, home improvement project, emergency, or simply to meet a pressing financial need.
Some significant benefits include:
- Fast liquidation: Most people tend to not use gold ornaments and instead leave these objects to collect dust in their closets. This idle asset can be quickly liquidated and used to raise capital. Even though this type of financing is often overlooked, it’s an excellent solution for many people
- Low-interest rates: Since the precious metal serves as a form of collateral, the lender can deem the borrower less risky and therefore provide lower interest rates. This can help you save over the lifetime of your loan
- Secure loan: Since this option requires only your gold, you won’t have to worry about others forms of collateral like your home or car
- Use however you’d like: You’re not obligated to use your loan for any specific purpose, giving you flexibility and peace of mind
- Get funds fast: This financing option is typically distributed quickly, so you can access the funds you need within a fast turnaround time
Gold Loan: Requirements, Interest, And Fees
A loan against gold will come with associated requirements and fees. This can range from processing fees to varying interest rates. Hence, you’ll want to carefully check out a variety of options.
- Requirements: Typically, these loans are only available for gold that ranges from 18 to 24 carats. Moreover, the necessary documents you must provide will depend on the specific lender. However, you’ll likely need to show proof of identification and address
- Interest: This amount can vary depending on the lender, although interest rates tend to range from 9.24% to 17%
- Fees: You might be charged a processing fee that can range from 1 to 3% of the total loan amount. Always inquire about early repayment fees and read the fine print carefully for additional information about hidden charges
Things To Consider And Consequences Of Missed Payments
When it comes to repayment, gold loans follow the same basic guidelines as other types of financing. If you rack up a history of missed payments, you begin to tread in dangerous waters. Failure to meet your monthly payments can seriously damage your credit score.
Once your rating is damaged, this can affect your ability to secure future loans, good rates on credit cards, rent a house, lease a car, and so forth. Before taking out this form of financing, do some careful budgeting and planning.
Make sure the monthly payment amount is something you can realistically manage for the foreseeable future.
If you feel secure in your ability to meet monthly payments, pursuing this financing option can be a wonderful way to meet your pressing financial needs.
Unlike other types of secured loans, you won’t need to risk a precious asset that you use daily such as your home or car.