One of the biggest hurdles to every individual’s financial security is a lack of adequate finances. The smaller your pocket, the bigger your worries. Getting a loan is the only way out for most people in times of financial crisis. There are numerous kinds of loans available in the market catering to different kinds of needs: personal loans, gold loans, auto loans, home loans and so on. Even though personal loans are ideal for short-term financial needs or unexpected expenses, the high-interest rates can put a dent in your wallet.
In such cases, you may consider opting for a gold loan. However, it has its advantages and disadvantages.
Here is a quick comparison of the pros and cons of gold loans
Gold loans: The gold loan is a type of unsecured personal loan offered to individuals by banks and other financial institutions. The lender agrees to lend money to the borrower against the borrower’s pledge in gold depending on gold price today Pune or any other city of India. In simpler terms, the borrower can use his/her gold ornaments as collateral for a gold loan from a bank or financial institution.
- Easy to get: Gold loans are also secured loans and hence there is no risk involved for the lender. You, as the borrower also do not need to worry about getting your asset back from the lender as it will be returned in case you fail to repay your dues as per the schedule agreed upon with him at the beginning of the deal. Hence, a gold loan is easy and quick to get approved for and can be availed for short term or long term financing needs just as per requirement. You can just look up gold price today in Agra or the city you live in and then get the loan, it’s that easy. Visit here for more info.
- Flexible: Also, these loans offer flexible schemes that allow you to avail the amount at any point in time during the tenure of your loan agreement. Moreover, during the loan tenure, you only need to pay the interest amount. You can pay the principal amount at the end of the loan duration.
- No problems with repayment: The repayment is decided by the prevailing rates of gold price in the market and there are no extra charges attached to it. Whereas, in the case of unsecured loans like Personal Loans or home loans, where you get money against your property and if you are unable to pay back, your property will be auctioned by banks. This can lead to unnecessary loss as your property may not fetch enough money.
Disadvantages of gold loan:
- High-interest rates: Initially, gold loans were cheaper than personal loans and other kinds of loans. But with falling gold prices, the Reserve Bank of India has set a minimum Loan-to-Value ratio for non-banking financial companies. This means that interest rates have gone up to match those of personal loans.
- Minimum Loan to value(LTV): As per RBI’s latest mandate, the NBFC (Non-banking financial companies) are prohibited from offering gold loans at a maximum LTV of 75%. Hence if you put up Rs. 10 lakh worth of gold jewellery for a mortgage, you will only get Rs. 7,50,000 worth of the loan.