A gold loan is a secured loan availed from the lender in return for the borrower’s gold as collateral. The loan amount is computed as the proportion of gold’s existing market purity and worth, usually up to 80 per cent. Low Manappuram gold loan interest rates or Muthoot gold loan interest rates are available to you owing to the gold loan’s secured nature. Unlike other loans which impose limits on how funds must be used, a gold loan has none of such impositions.
Investment corporations, NBFCs and other important financial entities make a gold loan available at a lower rate of interest. Unlike other loans, which impose a fixed term and high restriction for funds use, gold loans permit you to use the proceeds for any reason like an emergency, education, wedding, and others. Your credit rating is impacted by how you manage and control your credit repayments, i.e., the lenders investigate the summary of your past credit accounts. Late payments on loan EMIs, credit card dues and other expenditures, which are non-paid, reduce your credit score drastically.
The biggest part about the gold loan is, unlike other credit options, it has extremely less strict qualifying or eligibility requirements. Before approving your application for a gold loan, lenders do not consider your credit score. As an outcome, even someone with a poor credit score might apply for a gold loan and enhance their score over time by repaying the loan on time. Gold jewellery and ornaments act as collateral or security against gold loan proceeds, which decide your gold loan amount. The loan amount also is determined by the thorough gold value.
Payment history is one of the crucial aspects of credit ratings that holds the highest weight and accounts for 35 per cent of the overall credit score. One of the best ways to boost the credit history with a gold loan is to repay them on time. Discussed here are how the repayments of gold loans impact your credit rating in a few distinct ways –
Pay the EMI on time –
The potential to repay the gold loan in different ways is one of the finest benefits. Lenders offer a variety of repayment choices, with loan EMI being one of the most prevailing choices. Rapid repayment measures, upfront interest repayments, and interest repayment towards the end of the tenure are additional choices.
Coming back to the EMI repayment choices, you are required to pay a specific amount monthly to meet your debt. This sum includes a portion of principal and interest. Your credit score will enhance over time if you repay your EMI before or by the due date.
Early gold loan repayment –
Gold loans are generally looked upon as a loan with lower repayment periods that you can select as per your requirement. This makes gold loan repayments before a predetermined duration one of the effective ways to enhance your credit score.
On gold loans, few banks may not impose any extra fee or penalty. When you repay your gold loan before, it appears on your credit history and holds a favourable impact on your score. So, if your resources permit, paying your gold loan beforehand is undoubted the simplest way to increase your credit score.
Certain credit mix is maintained by the gold loan –
Also, it helps to have a good credit mix in its entirety when it comes to enhancing your credit rating. It is one of the major factors of your score that accounts for 20 per cent of your gross amount. A credit mix is a financial profile that consists of both unsecured and secured borrowings. You might be aware that a gold loan, by nature, is a secured financial source wherein you guarantee gold jewellery and articles as security or collateral. Therefore, the gold loan can help you in attaining a particular credit mix in their evaluations.
Credit rating refers to the concept that is impacted by a cascade of parameters. But at times, the simplest methods, such as repaying your loan on time and keeping financial potential, can go a good way in assisting you in establishing a viable and good credit score. Maintaining a credit score becomes easier with secured and reliable gold loan lenders as well.
Gold loan assistance is provided by most banks, NBFCs and other financial institutions, including Fintechs. In comparison to other credit options with fixed terms for using funds, a gold loan provides more flexibility to you to use your funds the way you want. For instance, education loans, weddings, or any unanticipated medical exigencies.
There is zero credit score need for availing of a gold loan. The major parameter for getting a gold loan is that you must have gold. Being secured in nature, your security or collateral and its purity are the most crucial for getting instant approval.
Advantages of applying for a gold loan –
∙ Instant processing
∙ Minimal documentation needed
∙ Interest rate charged is less than other loan types
∙ Flexibility on end to use the funds
∙ Zero processing charges
∙ There are zero foreclosure or prepaying fees. You are permitted to close the loan at any point in time
∙ Simple repayment options with zero need to levy any additional interest fees
∙ Best part about the gold loan is that its loan proceeds are estimated based on the current gold market price regardless of the gold price at which you conducted the purchase
∙ Lenders offer triple layered security to applicants’ gold loan ornaments that they keep as security or collateral. Financial institutions or banks have a separate vault to keep the pledged gold jewellery.
Know about gold loan eligibility parameters –
∙ Salaried, self–employed farmers, professionals, or traders can apply for the gold loan.
∙ Minimum age for the loan is 21 years, and the maximum age is 60 years.
∙ Must have a valid KYC document such as identity proof and address proof.
∙ It is one of the best funding options for all those who have a low credit score because the approval of the gold loan is not based on your credit profile.