The necessity for cash isn’t a novel idea, and most of us have had to deal with an unplanned and unplanned emergency. This creates an emergency cash shortage, and we often turn to loans to meet the cost of an emergency. There are both short-term and long-term loans. To get quick approval to fund usually, personal loans can be useful. However, when interest rates increase, EMIs on personal loans get more expensive. In these instances, loans against gold could prove beneficial.
Gold loans are considered the most suitable alternative if it’s to finance immediate needs like the cost of a child’s education or medical issue or marriage, the urgent requirement to travel or to raise capital to start a new business. Gold loans are loans secured by collateral which can be obtained through financial institutions or any other financial service provider by offering the gold you own as collateral.
Rajesh Shet, Founder and CEO of SahiBandhu, offers five reasons why lending gold is the most effective alternative to pay for emergencies that require cash. These include:
1. Quick Processing and Rapid Disbursals:
Thanks to the advancement of the latest technology, Gold loans have transformed to be one of the most simple to use, the most simple and secure financial options, particularly when instant cash is required. These days digital gold loans simplify the process significantly.
2. More Basic Eligibility Parameters:
The conditions for the gold loan are accommodating when compared to other types of financing. A strong credit score or proof of income is not required. It’s simple to raise money for immediate requirements, like funding higher education.
3. Greater loan-to-value
It is essential for people to have access to money during times of medical emergencies so that they receive treatment quickly. Obtaining a substantial amount of cash at the last moment is not easy. This could cause more costs. It is easier to raise money by making use of idle gold. Furthermore, they possess a high loan-to-value ratio (LTV).
4. Lower rate of interest:
Because gold-backed loans can be secured by collateral, their rates tend to be lower than other kinds of loans, including personal loans secured by properties, business loans, corporate loans, etc. In a crisis, a less expensive interest rate could appeal to people who need to borrow. The amount of repayment will be reduced, allowing efficient debt management.
5. Simple Repayment Options:
When they take out a gold-backed loan, the borrower has the option to make principal and interest payments at the time they need. In some gold loan programs, borrowers can make only interest payments at first and then pay the balance at the loan’s close. However, they can make the entire loan payment in one go.
SahiBandhu, the CEO, stated that in addition to the benefits mentioned above, gold loans come with no limitation on using their funds. This is why it’s among the most effective ways to finance in times of crisis, regardless of whether it’s for the family or a personal need. Many households in India are armed with gold, either as jewellery or coins.
Disclaimer: These opinions and suggestions made in the above paragraphs are those of the individual analysts or broking companies, not Mint. Mint.