Contemporary banking as well as financial institutions now have come a great long way; their transformation has become a game changer for individuals and businesses alike. Gold in India always has been used as a benchmark to understand your financial growth, stability, and prosperity. Even in contemporary times, the gold loan was a very popular funding option for many. Gold proved to be a stepping stone for the formation of present-day financial houses and banks that indulge in the channeling of funds from you to the lenders.
Before around 1920s, the gold standard was massively used as a financial system and the currency values often were associated with gold. The present-day fiat system by the Indian government replaced the standards of gold eventually. Now that you are aware of how gold has become a crucial element in the banking umbworld, let’s go deep into understanding what is a gold loan and how this credit option work.
Gold loan facts – breaking down
Understanding about the basics linked with gold loan will help you extremely if you are looking for availing of one. Gold loans can be considered as a secure loan option availed by the borrowing party. Here, gold articles and jewelry are pledged in the form of security or collateral, which serve as a safety net for bank lenders. Generally, loan proceeds granted to you as a borrower are below 75 per cent of the value of gold. The gold worth articles are calculated at the prevailing market standards. Also, note that as a gold loan is secured in nature, the interest rate charged on the loan is lower. For instance, if you consider availing an ICICI bank gold loan, then you will note that ICICI gold loan interest rate for the quarter range between January 2022 and March 2022 starts from 10 per cent per annum. However, the ICICI personal loan interest rate range anywhere between 10.75 per cent and 19 per cent per annum.
Gold loans are extremely the same as personal loans in the sense that it allow you to mitigate your financial requirements instantly. You as an applicant may opt for the gold loan to fund your home renovation, purchase, capital requirement for business, medical liabilities cover, etc. Most of these expenditures are categorized under the personal requirements section. Gold loan hold considerable benefits that make it just a perfect solution for your financial requirements.
Gold loans are a credit option, which is secured in nature, which makes it extremely less risky for financial institutions, and thus the processing of documents is straightforward and does not need additional measures. It offers you great flexibility to use money according to your requirements and needs with zero need for intrusions and speculations. Also, in scenario of gold loans, you are not overwhelmed by lender to offer any additional security.
Additionally, to all these, gold loan rates are generally lower than personal loans. These are few of the crucial details and the facts regarding gold loan. Now, let’s get a proper understanding about some of the common misconceptions regarding the same.
Also Check: ICICI Gold Loan Interest Rate
Misconception and facts linked with gold loan
There are several misconceptions linked with availing a gold loan that deters you from opting for this easy financial instrument. Specific mainstream misconceptions and their crucial facts linked with gold loan that deter you as an individual from opting for gold loan are as follows –
∙ The initial myth linked with gold loans is that just the jewelry shops provide it. This is one of the misconceptions, which is deep rooted, and individuals who do not have much knowledge about the same are left with just one choice. Alternative gold loan lenders include banks and NBFCs (non-banking financial companies). They offer secure gold loan schemes to you, which are systematic and secure. The rate of interest is even on the lower end.
∙ Many of you are often scared regarding your gold jewelry or other articles being replaced or stolen with any fake lookalikes. This is very far from the reality when you are availing a gold loan from any reputed bank or financial institution. The gold provided as security to such financial institutions is stored in a vault that has robust security arrangements in the apt place. Reputable finance houses even provide the protection and safety of the gold articles and jewelry. Note that you will get back the same gold ornament, article, or jewelry you provided as security after you repay your all your loan proceeds by the end of the repayment tenure.
∙ The third misconception is that a gold loan comes with lower interest rates. Truth here is, it is subjective. Not all loans against gold options offer the lowest rate of interest. However, the interest charged is usually lower than the personal loan interest rate. The interest levied on loan against gold is determined as per your gold’s weight and quality.
∙ Many of you generally have the viewpoint in mind that your gold jewelry, ornament, or articles are utilized for loan against gold as the articles are backdated, retrospective or ancient. This is thoroughly untrue; the Indian government has issued proper guidelines about the gold articles’ quality, and it has also stated that the extremely old ones may not be utilized for availing a loan against gold. Purity of the gold jewelry, ornament or article is just the determinant and according to the guidelines it should be nearly 18 karats.
- The last and most believed misconceptions are linked with gold loan processing. Many generally think that the loan against gold process is complex, and extremely time consuming. It is not the truth and thoroughly false, as the gold loans hold a swift processing procedure and often is processed and approved on the same day. For the approval, the loan requires basic KYC documents for the verification. After providing the KYC documents, the loan disbursal process may be complete, and the required funds may be raised to your bank account.