Every bank, and financial institution, including NBFCs and FinTechs, offers gold loan help. When compared to conventional loans with specified periods or requirements for using the funds, gold loans give the customer more flexibility to utilize the funds for whatever they choose, such as weddings, education loans, or any unexpected medical emergencies.
Benefits of gold loan
- Processing time is short.
- There is very little documentation required.
- In comparison to other types of loans, the interest rate charged is lower.
- End-to-end flexibility in terms of how the monies are used.
- There are no processing costs.
- There are no fees associated with the foreclosure. At any point in time, debt can be paid off.
- Simple repayment options are available without any added interest charges.
- The nicest thing about this loan is that the loan amount is calculated based on the current market price of gold, rather than the price at which you purchased the gold.
- The loan applicant’s gold ornaments, which they maintained as collateral, are offered triple-layered security by the financial organizations. All of the applicants’ promised gold jewelry is kept in a separate vault by the banks or financial organizations.
Gold loan eligibility criteria
- A loan can be applied for by anyone who is self-employed, salaried, a business owner, a professional, a farmer, or a dealer.
- To apply for a loan, you must be at least 21 years old, and you must be at least 60 years old to apply for a gold loan.
- A valid KYC document, such as address and identification proof, is required.
- It is the most suitable financing choice for anyone seeking a gold loan with a low CIBIL score.
Role of credit score in gold loan
- There is a link between loans and CIBIL scores. The lender considers the credit score to be a significant aspect in determining the creditworthiness of anyone applying for a loan. The situation with gold loans, on the other hand, is a little different. To begin with, it is a secured loan in which the borrower is expected to lend their gold ornaments to the bank or financial organization from which they are seeking a loan.
- The CIBIL score might assist you in obtaining large-ticket gold loans that are not limited by banks or financial organizations. They aren’t the deciding factors in getting the loan approved; rather, they serve as a foundation for extending a significant credit facility.
- In fact, a borrower’s CIBIL score might be improved with the help of a Gold loan. It is a better option when you need money quickly. It comes with a low-interest rate, flexible EMI options, and quick disbursement. It can be obtained with very few documents and by pledging gold jewelry.
- You can improve your credit score by paying all of your EMIs and interest payments on time and establishing a strong repayment history.
How to improve your credit score?
If you want to use a gold loan to create credit, you must first understand how to do so. When you take out a gold loan, CIBIL receives all of your EMI repayment information at regular periods in order to update your credit score in your credit report.
Pay the EMI’s regularly
The gold loan, like any other type of loan, has a specified interest rate and a repayment period. Paying your EMIs on time is essential if you want to develop credit. The lender reports all payments made toward the loan to credit bureaus. Paying EMIs on time is a form of positive financial development in a borrower’s life.
Go with a disciplined approach
Always proceed with caution while applying for a loan against gold. They are without a doubt the most effective technique to improve a credit score that is poor or non-existent. However, if you pledge your gold asset, you must ensure that you are paying all EMIs on time, as it carries the risk of losing your valuable gold if you do not repay the loan within the agreed-upon time frame.
In a word, gold loans are one of the fastest-growing trends for obtaining a rapid financial fix in the event of any financial emergency and improving one’s credit score. Thus, any individual can fulfill unexpected or planned financial requirements with easy gold loans and positively add to the credit score.