India is among the largest consumers of gold in the world. One of the reasons why India is a prime location for a booming gold industry is the sizeable reserves of gold in Indian households and the simple process of pledging the same to raise funds.
Apart from using gold as an alternative to personal loans and meeting immediate financial needs at home, businesses are also opting for gold loans instead of approaching banks and NBFCs for unsecured business-related credit. Gold loan have recently gained immense popularity as an alternative financial option among businesses. Much of its popularity stems from numerous unique features and benefits of gold loans.
Here are some of the benefits of pledging your gold ornaments, coins, and bars to fund your various business needs:
Quick loan approval and disbursal
When your business is going through a financially difficult time and is in dire need of urgent funds, you rarely have the time to undergo a lengthy application and documentation process. Both banks and NBFCs offer easy and quick approval and disbursal processes.
After you put through the loan application, the lender assesses the value and purity of the gold that you have pledged. Post valuation of your gold ornaments and submission of the KYC documents to the lenders, the lender may immediately approve your application. The principal loan amount is directly disbursed to your bank account.
Facility to determine gold loan eligibility
Every lender has an online calculator to help you assess the loan amount based on the value of your gold (it includes the purity and weight of the gold). You can calculate the maximum loan amount based on the weight (it should be between 18 to 22 carats).
You must consider the following factors while performing calculations:
- Your gold jewellery should not have purity lower than 18 carats.
- The weight you mention in the calculator must be accurate.
- The price of gold varies from one day to another. The price you get on the calculator is for that particular day.
Minimal documentation process
To avail of a conventional business loan, you have to go through several formalities and documentation processes. You will need to submit business documents, identification papers, and other documents like IT proof, income proof, etc. Arranging these documents can take your precious time.
However, the documentation involved in a gold loan is simple and minimum. As long as you are the legal owner of the gold pledged, you can apply for a loan. You will just need to provide your KYC documents.
Minimum Credit score requirement
Since you have pledged your gold as security, lenders are not interested in having a high credit score. Even if you have a low CIBIL score due to past repayment issues, you can still avail of a gold loan. On the other hand, a traditional business will not allow a credit score of less than 750.
A gold loan is a secured loan as the borrowers pledge their gold as security. The risk for lenders is low because lenders are sure of getting the loan amount back if the borrower failed to make payments. Therefore, lenders do not hesitate to offer gold loans to a borrower with a lower credit score.
Safety and security of gold
Gold jewellery is considered a prized possession due to both its monetary value and heritage value. Some of these ornaments are inherited and considered family heirlooms. Its safety and security are major concerns for borrowers.
Lenders follow a strict security protocol to ensure complete safety and security for your valuable jewellery. Your gold is kept in a secure vault until you make payments in full with interest. Some lenders even provide insurance for your gold.
Flexible repayment options
The best part about availing of a gold loan is that lenders offer immense flexibility when it comes to repayment. You can choose to make payments through monthly EMIs or repay the entire loan amount at once at the end of the loan tenure.
Likewise, you can choose to pay only the interest during the loan tenure and pay the entire principal amount towards the end of the loan tenure. You can choose an affordable interest rate according to your repayment capacity by using the gold loan interest rate calculator.
It includes other beneficial features like tenure flexibility, shorter terms, nil pre-closure charges, etc. These benefits can significantly reduce your repayment burden.
A gold loan is the best way to access funds for your business in times of financial need. You have the option to choose a flexible repayment tenure at an affordable interest rate. However, you should determine the interest rate through the gold loan interest rate calculator before applying for the loan.