When a customer pledges gold (including jewelry, ornaments and bank-issued coins) as collateral for taking a loan, it is known as a gold loan. The bank/lender uses the gold as security against potential payment default by the customer. The loan amount sanctioned is a certain percentage of the value of the gold that has been pledged.
Gold loans are short-term loans and the repayment period can range from one month to a few years. If you are in need of money for immediate expenses and expect to be able to pay it back in the short term, then this type of loan might be a good option.
A temporary financial crisis can happen to anyone irrespective of his or her overall financial status. Personal loans are a great way to offset any such temporary financial crisis as it allows the users to avail a loan without any pre conditions on the usage of funds. Personal loans have a quick approval mechanism with loans getting cleared as early as within 24-48 hours of the loan application submission.
Gold as an asset has emotional value in India since it is largely in the form of family jewelry. Providing gold as a collateral means that you run the risk of losing your family jewelry in case you are unable to repay the loan. This can cause undue mental and emotional pressure not just on the borrower but the entire family. So think carefully if you will be able to pay back the loan in full before you apply. It is good to have a proven track record of making loan repayments so that you are confident about your ability to recover your gold.
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