Loans are convenient, entirely adaptable, and can be used to meet your financial needs and want suitably. But availing too many loans at once turns out to be worse more often than not. Although, using a gold loan to consolidate your debts is one way to tackle that.
Banks and Non-Banking Financial Companies(NBFCs) have been for over seven decades, and a gold loan has been in existence long before the Reserve Bank OF India (RBI) validated it. People of the nation are accustomed and at ease with gold. Therefore, pledging it to meet a financial requirement has become simple. These authorized lenders provide gold loans upon receiving a gold asset as collateral. The loan amount sanctioned must be paid with interest by the loan term’s end.
A gold loan can be used for any purpose. Be it for Business expansion, home renovation, medical bill payment, car purchase, scientific research, or consolidating your debt. Most people tend to have many loans at once, and though availing of many loans can be beneficial, paying off each loan might be more challenging than anticipated. To ensure that these loans don’t make you end up in a deep financial pit, you can take out a gold loan. Debt consolidation means availing one loan to combine and repay all the other loans at once using the loan amount availed now. Generally, a personal loan is also used to consolidate debts, but a gold loan has many more favorable features than a personal loan when opting for a loan to consolidate your debts.
Why should you choose a gold loan for debt consolidation?
Debt consolidation, as mentioned earlier, involves consolidating many loans, and with multiple loans, there are many principal amounts and numerous installment payments. Therefore, the money requirement becomes more. As a gold loan is secured and the principal granted is based on the collateral’s value, you can choose the loan amount you require and pledge the collateral accordingly. The value of the gold depends on the purity, weight, and rate of gold on that day. The minimum purity required is 18 carats, and the maximum is 24 carats. The weight must be at least 10gm in a few banks and financial companies. However, most banks and NBFCs have no such requirements. Therefore, the higher the purity and the weight of the gold, the higher the loan amount sanctioned.
So, if the money requirement is more, pledge more articles or pledge one single article with high purity and weight. That way, the value of the asset becomes high. Thereby allowing the bank or the NBFC to grant you a large sum of money. Most banks and NBFCs usually grant up to Rs 1 crore as loan amount with a maximum loan to value ratio of 90%, and the loan amount is evaluated as per the Gold Loan Per Gram of the bank or NBFC.
The interest rate of the loan amount starts from 7% per annum and goes up to 20% per annum. The interest rate depends on the loan amount and tenure opted. The gold loan interest rate is another advantage for choosing a gold loan to consolidate debts. Compared to other secured and unsecured loans, the interest rate is much lower for a gold loan because of the collateral pledged. With low-interest rates come low monthly installment payments, and so, in the future, the EMI payments become much more affordable. The tenure of the gold loan is also short, and therefore, the loan can be closed soon with fewer EMIs.
Additionally, a gold loan also requires minimum documents. CIBIL score, income proof, and bank statements are required to avail a gold loan. Henceforth, even if you are unemployed or have a poor credit score, then availing a gold loan is exceedingly easy. The processing fee of many other loans is at least 1% of the loan amount, but in a gold loan, the processing fee is NIL in most banks and NBFCs. If you want to close the amount before the posted tenure’s end, prepayment is the way to do it. And to prepay your loan the financiers charge a fee and to prepay a gold loan a borrower doesn’t have to pay a penny in most banks and financial institutes.
Manappuram Gold loan is one of the best gold loans in the market. The Manappuram Gold Loan Rate Per Gram starts from Rs3,50 with an LTV ratio of 90% and a maximum tenure of 36 months. The NBFC is highly trusted and has impeccable customer ratings.
Also read this: Things To Keep In Mind During The Gold Loan Procedure