From unexpected medical bills to a family member suffering an accident, emergencies can happen at any time. This is why one needs to prepare for the worst and always have an emergency fund to fall back on when the unexpected strikes.
In such cases, a loan secured by an asset like gold may be the best option.
Gold holds a significant portion of the assets of most Indian families. During periods of need, gold, whether in the shape of bullion or jewellery, can be used as collateral to secure a loan. Gold loans can help with various issues that arise while applying for an unsecured personal loan.
Why is a gold loan the best option for an emergency fund?
A few reasons why a gold loan is the best for an emergency fund are:
When it comes to gold loan accessibility, the first thing that comes to mind is quick acceptance and disbursal. The key reason for this is it is one of the few credit instruments with minimal paperwork requirements. Borrowers can submit the required papers online after finishing the application procedure online.
Following that, borrowers acquire their loan amount within a few hours when the gold evaluation process is completed.
On the other hand, other financial instruments take at least 24 hours to process and verify before the funds are disbursed.
Obtaining a gold loan is simple with Muthoot FinCorp. The needed gold loan is executed within minutes after submitting the documents.
Attractive interest rates
Gold loans have typically reduced a financial institution’s lending risk because they are secured by nature. As a result, compared to unsecured loans, lenders give a more attractive interest rate against it.
The lowest gold loan interest rate is always appealing to borrowers, whether they are facing an emergency or not. It reduces the total amount owed, making debt management effortless. It has no negative consequences on a user’s financial status.
Borrowers can acquire a gold loan from Muthoot FinCorp with attractive interest rates starting from 11.99% per year.
Gold loans’ flexibility makes them a popular choice among borrowers when an emergency arrives. Borrowers also can pay the entire balance in a lump sum. Individuals can use these to coordinate and implement their finances to avoid defaulting on payments.
Easy eligibility requirements
Compared to other lending products, the eligibility restrictions for a gold loan are simple. Prospective borrowers can obtain funds without keeping a high credit score or exceeding the required monthly income.
However, they need to provide gold of acceptable quality. Gold loans also have the advantage of not requiring proof of income. Though some of its unsecured equivalents require borrowers to present this document, this one does not.
High loan to value
A gold loan has a relatively high LTV (loan-to-value) ratio, which allows asking for a greater loan amount during an emergency.
With Muthoot FinCorp, one can get up to 75% of the value of the gold that they pledge. Individuals can get a gold loan up to Rs. 50 lakhs.
Used for any purpose
When it comes to the practicality of a gold loan in an emergency, its main selling point is that it has no end-use restrictions. Borrowers can put the funds towards a variety of things. The lender will not intervene in this situation.
Points to consider before opting for a gold loan
Gold loans can be a great way to get emergency funding, but there are a few things applicants need to keep in mind. Make sure to only borrow from a regulated financial institution. Unregulated lenders are much more likely to be fraudulent.
Remember that the lender’s credibility is crucial, as one is entrusting them with their gold. The value of gold is usually higher than the loan value, so applicants need to be confident that their collateral is safe.
It is critical to be informed of all potential consequences before taking out a loan. This involves knowing the loan’s terms and conditions and any applicable fees or charges.
However, if one defaults on the loan, serious consequences can be there. The pledged gold may be seized and auctioned off to repay the outstanding balance, negatively impacting the credit history and score.
Therefore, you must take the time to understand all the financial implications of the loan before making a decision.