Emergencies often demand immediate solutions. The same is the case for any financial emergency. However, getting immediate solutions in case of a financial crisis can be difficult.
In this regard, gold loans can come in handy. The flexible eligibility parameters and easy availability of this financial product make this credit line a viable option for financial exigencies.
Why is Gold Loan a Suitable Option During a Cash Emergency
Here are the features of a gold loan that makes it a viable option for financial exigencies:
- Fast loan approvals
Gold loans are among the few credit facilities that require minimal paperwork. Consequently, applicants can get fast loan approvals and disbursals. After submitting a gold loan application and the required documents, applicants can receive the loan amount within a matter of hours.
- Simple eligibility criteria
Compared to other credit products, a gold loan’s eligibility parameters are quite simple. Potential borrowers can obtain funds despite a low credit score. However, they must make sure their gold ornaments adhere to the required quality standards. Further, an applicant must also ensure that he/she falls within the eligible age bracket to opt for this credit option.
- High loan quantum
A gold loan offers a relatively high LTV (loan-to-value) ratio, which makes it possible to qualify for a bigger loan amount. According to the RBI, one can obtain up to 75% of the market value of the pledged gold ornaments as a loan.
Further, one can pledge more gold ornaments if he/she wants a high loan amount. Hence, borrowers should evaluate their needs and then submit applications. This will enable them to manage their debts and overall finances in a better way.
- Lower interest rates
Being a secured loan, financial institutions offer gold loans at a lower interest rate. This is because of the low risk associated with gold loans. Borrowers always look for a cheap interest rate, regardless of whether they are in an emergency situation or not.
It reduces the total repayment amount, which makes it possible to manage debt more effectively. Additionally, affordable EMIs allows a borrower to manage his/her monthly expense without any burden.
- Flexible repayment options
Gold loans have become a popular option in the Indian market because of their flexible repayment terms. Along with EMIs, reputable lenders also provide upfront interest payments. Additionally, borrowers have the option of making a single, lump-sum repayment of the borrowed amount.
These options enable people to effectively plan and manage their finances and prevent possible credit defaults. Further, one can use a gold loan calculator to determine the total interest payable and make an informed decision accordingly.
- No end-usage restriction
One of the biggest advantages of applying for a gold loan is that one can use the borrowed sum without any restrictions, or obligations. This means a borrower can use a gold loan to fund expenses for personal purposes, medical exigencies or business ventures. The lending institution will not intervene in any matter.
Where Can You Use a Gold Loan to Meet Financial Crisis
A borrower can use a gold loan for the following purposes without any restriction:
- Funding the medical expenses
Medical exigencies can result in substantial expenses. Utilising the money by pledging gold ornaments can save borrowers in these situations. Due to the no end-to-end usage restriction, borrowers can take care of their medical bills as and when needed with the help of a gold loan.
- Funding business expenses
Since there is no maximum loan amount, unlike professional loans, one can pledge gold ornaments as needed to obtain the required amounts. In addition to using these funds to cover immediate business needs, one can also use them for future development. However, while pledging gold, one should keep in mind that he/she cannot keep gold bars or coins as collateral.
- Paying utility bills
Unpaid utility bills can sometimes be a burden for the pockets. Borrowers can repay their utility bills with a gold loan, despite the reason being non-repayment.
- Opting for debt consolidation
Keeping track of several debts is time-consuming as well as expensive. The reason for this is that one must pay attention to all due dates and interest on numerous loans. One can choose to consolidate these obligations and make a single instalment by opting for debt consolidation.
Gold loans can be a perfect solution in this case. Additionally, the interest rate is lower than other loan options. As a result, one can significantly reduce repayment costs and financial burdens.
A gold loan can be the perfect choice to handle any financial situation, given its advantages and benefits. However, to make a well-informed choice, remember to read the loan’s terms and conditions before applying for this secured credit option.