When faced with financial emergencies, we always look for a quick and reliable source of funds. During these situations, gold loans have proved to be the most trustworthy and popular choice of individuals due to their accessibility and seamless process.
While numerous loan options are available, the question always arises as to why this loan type is most preferred. Let’s dive in and learn more about this, along with insights on choosing the right type of financing for your current situation and needs.
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Understanding Gold Loan Interest Rates
A gold loan allows borrowers to keep their gold assets as collateral and get funds quickly. It’s a secured loan, and lenders typically charge lower interest rates because a tangible asset is kept as security. The interest rates in this loan type usually range between 9% and 28%, depending on the purity of the gold and several other factors.
Factors Affecting Loan Interest Rates
Gold loan interest rates vary due to different factors, and here are some of them:
- Loan-to-Value (LTV) Ratio: It’s the ratio of the loan amount to the value of the gold that’s been kept as a security. Generally, lenders offer loans of 75% of the value of gold. However, the interest rate may change depending on the purity of the gold.
- Loan Tenure: If you aim to repay the loan in a short period of time, you may be charged a lower interest rate.
- Loan Amount: A high loan amount may have a slightly high interest rate.
- Credit History: While the loan depends on the collateral, if you have a good credit score (potentially more than 700), the lender might consider charging a lower interest rate.
Gold Loans Vs Other Loan Options
Here’s a quick overview of the comparison between different types of loans before you go ahead and apply on an instant loan app:
Personal Loans
- Interest Rates: As personal loans are unsecured in nature, interest rates are slightly higher than most of the loans.
- Eligibility: Mostly requires borrowers to show their CIBIL score and a specified monthly income.
Tip: Avoid considering personal loans if you have gold assets to keep as a security and need funds quickly.
Credit Card Loans
- Interest Rates: Involves very high interest rates and fees.
- Repayment Tenure: This may include a limited repayment period.
Tip: Use credit cards only when needed and avoid cash withdrawals. Instead, apply for a loan through gold loan apps and get quick funds at competitive interest rates without making it a financial burden.
Home Loans
- Interest Rates: These are mostly lower but include longer tenures, as the loan is taken specifically to buy, build, or renovate a house.
- Loan Type: Secured loans, keep property as collateral.
Tip: Take a home loan only if you are considering a sum for the house, want to keep your property as collateral and are looking for longer repayment terms.
Why Choose Gold Loans?
Now that you have understood other loan types, let’s learn why you should choose gold loans:
- Unlike unsecured loans, lenders charge competitive rates, considering a borrower keeps gold as collateral.
- The application process is seamless, and funds are disbursed quickly.
- Lenders typically don’t consider borrower’s credit score. However, you can ask for a lower interest rate if you have a good score.
- Borrowers can choose a repayment tenure based on their financial conditions.
- There is no restriction on using funds, as you can use them however you want.
Conclusion
It is evident that gold loans are a reliable and quick source of funds, but they should be considered when you need funds in an emergency. Choose a reputable platform like Bajaj Finserv that promises a straightforward and hassle-free application with quick disbursement. It offers loans as high as ₹2 crores with interest rate charges starting from 9.50% and promises transparency of terms and conditions.
Remember to read the document carefully, learn about the terms and conditions, and make a decision based on your current financial situation.
