Last Updated on March 8, 2024 by admin
The coronavirus pandemic has changed the way people look at their financial health.
People are taking their finances more seriously after the financial strains the lockdowns and medical expenses during the pandemic put on them.
With the number of layoffs and business shutdowns, almost every individual has experienced a shortage of cash inflows at some point in time.
In these turbulent times, gold loans have emerged as a quick and dependable fund generation option.
The gold loan process is simple, and they offer flexibility and convenience to the borrower.
But are gold loans as good as they sound?
Let us look at the advantages and disadvantages of taking a gold loan in 2022.
Advantages of Taking a Gold Loan
- Instant disbursals: As most people are experiencing an urgent cash requirement for personal and business purposes in 2022, gold loans are coming up as the easiest way to arrange instant cash. With Muthoot Fincorp, borrowers can get instant cash in their linked savings bank account as soon as their loan application is approved. Registered customers who have not taken the full LTV, can get the remaining loan amount by simply sending an SMS to Muthoot FinCorp.
- Low-interest rates: The interest rate on a gold loan is much lower compared to other types of loans like personal loans, which may charge up to 25% interest per annum. This is because gold loans are secured loans and the lender has the assurance of the pledged gold with him. Muthoot FinCorp provides gold loans to its customers at much lower interest rates, starting at only 11.99% per annum.
- Higher loan amount: The loan amount a lender sanctions to a customer under a gold loan scheme depends on the value of the gold pledged. If the gold’s purity and quantity are high, the customer can get a higher amount as a loan. Muthoot FinCorp provides 75% value of the pledged gold as a loan to the customer. This amount can range anywhere between Rs. 1500 and Rs. 50 lakhs, which gives a borrower the freedom to take the loan as per his requirement and the gold he wants to pledge.
- Flexible repayment options: Unlike other debt instruments, gold loans offer multiple repayment options to the borrower. Customers can choose to repay the loan as regular EMIs, as bullet payments, or pay only the interest amount during the loan tenure and pay the interest when the loan’s term ends. Such repayment flexibility is a boon in the present times when most people do not have steady monthly cash inflows. Muthoot FinCorp charges zero foreclosure charges after three months if the borrower wants to repay the loan early and save on the interest charges.
Disadvantages of Taking a Gold Loan
- Losing your gold assets: Since gold loans require the customer to pledge his gold valuables as collateral, it can be a disadvantage for a person who is not disciplined with his repayments.
- Negative CIBIL score: Like any other loan, missing the repayment due on a gold loan can lead to a negative CIBIL score and create a negative credit history for the borrower.
If a borrower is disciplined with his repayments, he need not worry about his gold ornaments or CIBIL score. Since gold loans come at a low-interest rate and flexible repayment options, most borrowers find it easy and stress-free to take a gold loan.
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