Often in life, sudden money crunch situations occur, which require quick remedial action. During such situations, when you need to source a significant sum of money at short notice and that too at a low interest rate, so that the debt does not overwhelm you, gold loan is one of the first options you should consider.
Indians consider gold an auspicious metal and love to accumulate it - in the form of ornaments, gold coins or bars - and make it a part of their wealth accumulation. Some prefer to invest in paper gold, that is, gold ETFs.
To obtain gold loans however, you need to use the gold which generally lies idle at home or in the bank locker. You can make this asset liquid without selling it, that is, by taking a loan on it in times of need. A loan will be sanctioned on completion of some minimal paperwork and satisfactory assessment of gold ornaments by the lender. Generally, the lender will give you a loan that is 60-80% of the value of the security, namely, the gold you have provided.
The lender retains the exposure to the market risk arising from movements in the market price of gold. Some banks claim to process gold loans in three minutes, while most banks hand you the money within an hour.
A gold loan can be especially useful when you need quick money for a short term as this loan is for a short tenure of one year and can also be foreclosed at any point of time. The rate of interest is much lower than a personal loan because of the security provided. Also, there is generally no prepayment penalty levied.
Interest rate - 10 -12%; loan tenure - one year; processing charge - 1-2% of the loan amount; and loan value - 60-80% of the evaluated gold value.
You can choose to pay interest on a monthly or quarterly basis - no EMIs to pay or worry over.
When the total loan amount is repaid to the bank, the gold held as security is released and given back to you. You can opt to foreclose the loan anytime during the tenure.
Only during instances where the interest has not been paid on time, an additional penal interest rate of 1-2% maybe charged by the bank.
A significant aspect for a gold loan is that you do not require a source of income to benefit from the loan.
Approach the loan desk of the bank of your choice and state your intent to purchase a gold loan. A simple form will be required to be duly filled and the bank will proceed to evaluate your gold, the charge for this is usually borne by the loan applicant and can be anywhere between Rs 100 and Rs 250.
A stamp paper needs to be provided to the bank post evaluation for pledging the gold as security in exchange for a loan.
Once this is done, the loan amount is credited to your bank account, which you can withdraw for your use.
In case of an emergency fund requirement, rather than look at personal loan as the only option, one should exhaust the possibilities of securtised loans such as gold loans as these work out to be less expensive with comparatively lower interest rates.
No comments:
Post a Comment