Gold loan as a viable option to consider this year

With gold being a prominent feature in India's investment landscape, the demand for gold loans,has grown in response to the economic impact of the pandemic. Faced with economic uncertainty propelled by a subdued economic activity during the pandemic, most households and businesses pledged their gold assets as collateral to counter the liquidity crunch and finance their immediate personal and business requirements.

Here are some of the reasons for the rise in demand for gold loans:

• - Job Losses/Slashed Incomes
• - Fulfil Working Capital Needs
• - Emergency Funds during a Health Crisis

As the pandemic situation continues to be fragile, one could strongly vouch for gold as a viable option in 2021 owing to the myriad benefits of pledging gold or availing gold loans.

Benefits of a Gold Loan

Instant Approval process

A gold loan can be instantly availed by pledging your gold to the lender, with the loan amount being quickly approved within a matter of few minutes. The documentation procedure and loan processing time for gold loans is quite minimal in comparison to other types of loans such as personal loans. Such instant approval and disbursal of the loan amount are responsible for the high popularity of gold loans.

Cheaper Interest Rates

Financial institutions have been actively promoting and launching gold loan schemes with lower or fixed interest rates. Even with a poor credit score, a borrower could be assured of the same interest rate on a gold loan as given to a borrower with a good score. As the gold loan is secured, it attaches lesser weightage to a borrower’s credit score.

Loan Value

The loan amount that a borrower would be eligible for depends on the amount of gold pledged by him/her with the lender. As the gold prices continued to soar during the pandemic, the quantum of gold loan amount offered by financial institutions was also handsome and could comfortably fulfil the borrower’s financial requirements.

Tenure

The tenure of gold loans also varies as per the loan amount and repayment options. Gold loans normally come with a one-year tenure. Given that gold prices have corrected themselves recently, lenders are willing to recalibrate the loan tenure to 3 years or beyond and have been encouraging borrowers to pay their customised monthly EMIs.

Repayment terms

Gold loans offer several flexible repayment options to their customers. With an increasing demand for gold loans, few lenders are offering a rebate on monthly interest payments. If the EMI payments are defaulted upon, the lender can recover the loan dues by taking possession of the mortgaged gold.

Conclusion

Until the COVID-19 pandemic retracts, and the prevailing economic uncertainty fades away, gold as a viable option in 2021 remains robust. Gold loans shall also continue to be popular avenues of financing personal and business needs in these troubling times. Availing gold loans from credible financial institutions such as HDB Financial Services also holds the key to raising sufficient capital or loan amount at affordable interest rates.

Worry not, HDBFS ensures the safety and security of your pledged gold in their custody during the loan tenure and returns it to you without any damage after the loan repayment in full. Your gold is insured and safe in their fire and burglary-proof vaults. You can now apply for a gold loan by getting in touch with your nearest HDBFS branch and get it sanctioned within a matter of minutes