Gold is undoubtedly the most commonly and vastly owned asset across all regions and communities in India. Most of the financial institutes offer loan against gold as collateral at fairly simple terms. Getting a gold loan is very easy, does not require too much documentation and the interest rates are also not very high. Thus they would seem like an ideal option in case one requires funds but there may be some myths associated with these loans that may discourage those who may be interested in exploring this option. So let is help you bust these myths so that you can use your gold to access funds.
Myths and Facts About Gold Loan:
You Cannot Get Loan Against Traditional Jewelry:
It is often assumed that loan against gold may be available only against sovereigns or gold in other non-ornamental form or they may believe that loan may be available only if the ornaments are new. Believing this to be true lots of people with gold ornaments may hesitate to borrow even when they require funds.
Fact Check: It is possible to get loan against gold in any form whether it new or old or in the form of ornaments or otherwise. The only condition is that gold must be of at least 18 carat purity. If the lenders are satisfied with the purity they assess the value of your gold and then sanction loan based on the assessed value.
Interests Rates Are High
Another factor that may dissuade someone from getting a gold loan is the myth that the interest for these loans is very high. Often loan against gold is taken for miscellaneous proposes just like a personal loan.
Fact Check: Gold loan interest rates vary from lender to lender but they start from 9.6 % and may range up to 17%. However if you compare it with personal loan interest rates then they are much lower. Personal loan interest rates range from 10.65% to 24% which is much higher that gold loan rates.
Only Jewelers Provide Loans Against Gold:
Prospective borrower may believe that only jewelers provide loan against gold and they may hesitate to approach a jeweler for this. Financial institutes have defined processes in place thus borrowers find them more trustworthy.
Fact Check: Almost all leading banks and NBFCs offer loan against gold in current times. While there are some NBFCs that offer only gold loans, getting a loan against your gold is possible from any bank nowadays which gives you plenty of choice. Taking a loan from a reputed bank or NBFC is always safe and you can be sure about the processes too.
You May Not Get Your Original Gold Back:
This may prove to be the biggest deterrent for someone looking at getting loan against gold. Borrowers may worry that when they give their gold as collateral for getting a loan, they may not get it back due to some reason. They may assume that their pure gold may be exchanged for gold of inferior quality or they may feel that the lender will try to cheat them out of it on some pretext.
Fact Check: However this is not true. If you take a loan from a reputed lender then they ensure that your gold is kept safe in proper vaults. There is no attempt to exchange gold ornaments for those of lesser value or inferior grade also. Once the loan is paid you can easily get your gold back without any hassles.
So next time you need funds do not hesitate to use your gold as collateral, do not let these myths deter you. Getting gold loan is not tough and you do not have to worry about your credit report too!
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