Reasons Why People Prefer a Gold Loan Over Other Loans
When it comes to having instant funds, be it is for personal or business reasons, a gold loan is a preferred choice for many. There are options available like a personal loan, but a gold loan is simpler and a better proposition.
In a goal loan, an individual takes credit against their gold jewellery or coins as the collateral asset. Gold loans have been around for a long time and today with several NBFCs facilitating loans in a smooth and organised manner, it has become a preferred choice for most.
Let us delve deeper to understand the reasons that have made gold loan a popular option:
- Low Interest Rates
The low interest rate of the gold loan is a major point in its favour. The other popular option is a personal loan. However, the interest rate of a personal loan is very high. When given a choice between the high interest rate and low interest rate, people would obviously choose the one where they have to pay less interest. This is even advisable because by choosing gold loan over a personal loan, a person decides to easily prevent an unnecessary expenditure in the form of the higher interest rate.
- Quick Disbursement
When applying for a personal loan, it usually takes about 2-3 days to verify everything before the bank disburses the amount. In case of a gold loan, the disbursement is quick, almost instant. Since the person is already taking the collateral asset with them to the NBFC, a great amount of work is minimised. This allows the NBFC to disburse the amount in as quick as an hour. This is particularly helpful when someone is looking for instant funds and waiting for 2-3 days is not really feasible. The lower interest rates and quick disbursal of money make it a preferable choice.
- Low Processing Fee
Another reason people prefer gold loans is because of the low processing fee. It is minimal and, in many cases, nil. Which means that the person applying for a loan does not even need to pay a processing fee for their loan. For a personal loan, many banks charge up to 2.5% processing fee. Even loans of large amounts, like a car loan or an education loan, require an individual to pay a processing fee.
- Credit History is Not Important
When applying for a loan, your credit history, or CIBIL score, is taken into consideration. This reveals to the bank your history of loan repayment, including details like if you have ever defaulted on payments, delated an EMI, etc. Looking at the low CIBIL score, a bank may decline the application or approve it on certain conditions. However, in case of a gold loan, the CIBIL score is not a factor as you offer your gold as collateral.
- Income Proof Not Needed
Whether one is applying for a home loan, personal loan, or a car loan, the SOP of a bank is to take the applicant’s income into consideration, which plays a major role in deciding whether an individual qualifies for the loan amount they have applied for. For a gold loan, even the income proof is not required. One can directly visit an NBFC with their gold and apply for a gold loan.
The key reason why people prefer a gold loan comes down to the fact that the price of the gold loan is affordable. It is also easier to avail than a personal loan. When you take into consideration the aforementioned 5 factors, it is fairly obvious why people prefer a gold loan.