Gold loan is cheaper than personal loan! But one small mistake can cause you to lose your gold, know the advantages and disadvantages

Gold Loan Guide: In today’s time, when there is a sudden need of money, people look for many types of loan options, in which gold loan is considered an easy and fast option. This is a secured loan in which you borrow money from a bank or finance company by pledging your gold ornaments or jewellery.

In gold loan, you deposit your gold jewelery with a bank or NBFC and in return you get a certain part of its value as a loan. Generally, loan is given for 70 percent to 75 percent of the value of gold, which is called LTV (Loan to Value). When you repay the entire loan and interest, your gold is returned to you.

How easy is it to get gold?

According to experts, taking a gold loan is quite easy. For this you do not have to go through much paperwork. All you have to do is go to the bank or finance company with your identity documents (like Aadhar card, PAN card) and gold jewellery. There the purity and weight of gold is checked and the loan amount is decided on the same basis. Many institutions approve the loan within a few hours and the money is transferred to your account.

The biggest advantage of gold loan

The biggest advantage of gold loan is that it is available quickly and the process is easy. Since it is a secured loan, its interest rate is lower than that of a personal loan. Apart from this, usually there is no need for much credit score, hence even people with low CIBIL score can easily take a loan.

This loan also has flexibility, like you can pay through EMIs or pay only interest and eventually repay the entire principal amount. It is considered a good option to meet short-term financial needs.

Some disadvantages of gold loan

However, experts say that there are some disadvantages of gold loan, which should not be ignored. The biggest risk is that if you are unable to repay the loan on time, the bank or company may auction your gold. Additionally, you may have to pay additional margin if the price of gold falls. In some cases, processing fees and other charges may also be higher. If the loan continues for a long time, the interest burden may also increase.

Experts believe that it is better to take a gold loan when you need immediate money for a short period of time and you have a fixed source of income so that you can repay the loan on time. This can be useful for medical emergencies, business needs or short-term expenses.

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What is the risk in gold loan?

According to experts, gold loan There is definitely an easier and faster option, but your precious gold is at stake. Therefore, before taking a loan, the interest rate, charges and payment terms should be understood thoroughly. With proper planning and timely payment, gold loan can prove beneficial for you, but carelessness can also put you in loss.