Why should you invest in Gold Loans?

Gold Loan Industry is an organized industry that is estimated at about INR 3.5 trillion which means 7% of the entire personal loan industry which is estimated at over INR 25 trillion. In India, all big banks are competing to offer low gold loan interest rates and low processing fees to acquire customers.

NBFCs also offer gold loans. NBFCs In the short-term, customers are increasingly using gold loans from NBFCs to borrow more against their current pledges by taking advantage of the higher LTV caused by the substantial increase in gold price. Since many do not have enough collateral to provide against bank loans, they are relying on dealers, shopkeepers, and small-business owners to aggressively pursue gold loans to satisfy working capital requirements to launch their operations.

Borrowers need to gain thorough understanding of the terms and conditions of their loan to avoid future inconvenience. If you wish to make use of your idle gold, gold loan could be a great option.

Here are some of the top reasons to invest in gold loans.

A Gold Loan's Ease of Disbursement Compared to a Personal Loan

Your monthly income determines when a personal loan will be disbursed. It ensures simplicity in accessibility and distribution. Financial organizations also run a credit report on you. You are free to spend the money however you feel suitable.

You may allocate the money you want for gold loans as well. There is no reliance on credit scores. However, these loans are secured by a deposit of gold jewellery.

Processing Time And Collaterals

All that is required as security for personal loans is evidence of income. In order to sanction and distribute the loan amount, gold jewellery must always be used as collateral for a loan against gold. In contrast to personal loans, the processing time for the latter takes less time.

Loan Tenure

When a borrower submits an application for a personal loan, the lender undertakes a thorough investigation into or analysis of the applicant's repayment potential. However, no such investigation is necessary for gold loans. Gold holdings are already available as loan collateral.

Charges for Processing

The processing fees for gold loans are negligible. Personal loans, on the other hand, are always subject to a processing fee that ranges from 0.5 to 1% of the total loan amount.

A Personal Loan vs. a Gold Loan: The Required Documentation

Documentation for personal loans is extensive, requiring everything from pay slips or other income proofs to proofs of your identity and place of residence. Borrowers are not required to submit any papers as evidence of income for gold loans.

Flexible Repayment Terms

Personal loans have less flexible payback terms than loans against gold. Due to the fact that a secured loan always ensures timely payments, these are accommodating to customers. Although the EMI option is the most common and simple, you can also pay the principal plus interest throughout the course of the loan. At the conclusion of the term, you can also make a lump-sum payment of the entire principal plus interest. You must make EMI payments for personal loan repayment based on the specified interest rate with the least amount of flexibility.

Interest Rates

A gold loan will always have better interest rates than a personal loan when you compare the two. A loan against gold is secured, whereas a personal loan is not, and this is the major factor. Gold loans typically have interest rates in the 11–13% range. This range varies between 16 and 22% for personal loans.

Gold Loan vs Personal Loan

A time may come when you experience a financial crisis. You may not have a rainy day fund or you may not have a mechanism to withdraw that extra money from it. Fortunately, the way credit markets function today has evolved thanks to banks & non-banking financial institutions (NBFCs). Given that Indians enjoy purchasing gold and view the yellow metal as a wise investment, obtaining gold loans is much simpler for a borrower. Gold presents a profitable lending possibility over the long run. It justifies the reasons to invest in gold and why it is a much better choice than a personal loan.

The average customer is starting to comprehend the possibility of a gold loan today. It is reasonable to assume that when you compare gold loans to personal loans, gold loans are by far the more popular choice. India's gold loan market has touched Rs. 4,617 billion this year and most NBFCs are optimizing their asset utilization.