A secured loan taken from a lender in exchange for the borrower’s gold articles (within a range of 18-24 carats) as collateral is known as a gold loan (also known as a loan against gold). The loan amount is calculated as a proportion of the gold’s current market worth and quality, usually up to 80%. Low gold loan EMI rates are available from nationalized banks, private banks, and other financial institutions. Unlike other loans, which may impose restrictions on how the money is used, this loan has none.
Your credit score is influenced by how you handle and maintain your credit payments (a numeric summary of your credit history). The RBI has made it necessary for banks to examine consumers’ CIBIL scores before making any loans. Because personal loans are unsecured, they pose a greater risk to a bank. A high CIBIL Score, among other things, indicates to the bank that you are more likely to repay the loan.
Gold Loans, on the other hand, necessitate the possession of leverage in the form of a relatively liquid tangible commodity, such as gold. Because your Gold asset serves as insurance and shields them from default risk, banks are more likely to issue you a loan despite your poor credit score.
What Makes a Gold Loan the Best Option for Raising Your CIBIL Score?
Among the different forms of loans accessible, gold financing is one of the most realistic options. In today’s environment, getting an immediate gold loan is even easier because the application procedure is done online, and gold loans can help you boost your CIBIL score.
Low gold loan EMI rates, affordability, and accessibility are just a few of the advantages of gold loans. However, one jumps out: it can help you improve your CIBIL score and potentially expand your credit alternatives in the future. Always keep in mind,
Payback on Time
If at all possible, pay your EMIs (Equated Monthly Installments) on or before the due date. Your credit score will rise if you pay your EMIs on time. Maintain your concentration, and you’ll soon have a good CIBIL score and a slew of options.
Collateral Auction Should Be Avoided:
This is a strict no-no. While some lenders may be kind and not penalise you for one or two late EMI payments, your credit score will suffer and your gold will suffer. Make the most of your money, but avoid skipping payments at all costs.
While Gold Loans are more convenient to obtain, you will be putting your valuable valuables at danger for the period of the loan. While this may be essential in an emergency, it may not be the best option in the long run. Find measures to improve your credit score and, if necessary, switch to an unsecured loan as soon as possible.
What are the most common EMI and processing costs for gold loans?
Depending on the lender, a gold loan can be obtained. Gold loans have EMI rates ranging from 9.24 percent to 17 percent. A processing fee of 1-3 percent of the loan amount is commonly charged by some lenders.
People who need money but have a low credit score can use a gold loan to improve their credit score. Your credit score will be substantially improved if you return any loan on time, even if it is a Gold Loan. Take out a gold debt and pay it off early, as this will have a bigger influence on your credit than a non-secured personal loan.
