How Can Gold Loans Help You Improve Your Credit Score?

Gold Loan

Gold loans are a type of secured loan granted against the collateral of gold, including jewellery or bars of specific purity. Usually, gold loans are only given against gold with a purity ranging from 18 to 24 carats. The gold loan amount typically depends on the value of the gold rate in India, which is usually up to 75% of the market value. 

However, with the introduction of regulations, the gold loan industry has witnessed the emergence of several organized financial institutions. These financial institutions offer competitive interest rates as per gold rate in India, making the gold loan process more transparent and secure for borrowers. As a result, many individuals now prefer to take the gold loan with the lowest gold loan rate today from regulated and certified lending institutions rather than dealing with unorganized players.

How to utilize a Gold Loan to Improve Your Credit Score?

When you apply for a gold loan, you provide gold as collateral to the lender. Since the loan amount will depend on the gold loan rate today and is backed by security, the interest rates may be more competitive than unsecured loans. This is because, in the event of default, the lender can use the gold to recover their money. Repaying a gold loan over time is possible through equated monthly instalments, making it easier to manage your finances. Gold loans can be a useful tool to improve your credit score if you use them responsibly. Here are some ways that gold loans can help:

Timely payments

Gold loans with the latest gold loan rate today require regular payments towards the loan, which can help establish a good credit history if you make the payments on time.

Diversify credit mix

A mix of different types of credit can improve your credit score, and a gold loan can diversify your credit mix if you don’t already have a secured loan.

No credit check

Gold loans don’t typically require a credit check, so they can be a good option for people with bad credit who need to improve their score.

Lower interest rates

Gold loans often have lower rates than other types of loans, making it easier to make timely payments and improve your credit score.

Documentation and procedure for gold loans

Gold loans are secured loans that require minimal documentation and processing time compared to other loans. You only need identity, address proofs, and photographs to obtain a gold loan. Lenders well-known for providing gold loan usually have a team dedicated to evaluating and verifying the gold being pledged by borrowers. This helps reduce the processing time for borrowers, making it an efficient and hassle-free experience. Moreover, the lender will store the gold securely in their vault, ensuring that the borrower’s asset remains safe and protected during the loan tenure. By opting for a gold loan with gold loan rate today from reputable financial institutions, borrowers can be assured that their gold is in good hands, and they can focus on repaying the loan on time without any worries about the safety of their assets.

Understanding interest rates and other charges in gold loans

Gold loans are offered with interest rates ranging from 9% to 15%, depending on factors such as the current economic situation and the lending institution’s policies. The Loan Value ratio also affects the interest rates, with higher LTV loans attracting higher interest rates. To offer more flexibility to borrowers, some lenders have introduced a new concept in which the borrower can avail of a gold loan and pay interest only up to the exact day of borrowing, regardless of the maximum tenure for which the loan was taken. Moreover, gold loan does not attract any prepayment charges. However, a processing fee ranging from 1-3% of the loan amount is charged by most lenders. It is advisable to carefully read and understand all the charges associated with a gold loan before availing of it.

Benefits of obtaining a gold loan

  • Gold loan interest rate is generally lower than a personal loan, making it a more cost-effective option.
  • Gold loans offer a wide range of end-uses, similar to personal loans, and borrowers can utilize the funds for any purpose they deem fit.
  • The gold loan can be prepaid anytime without incurring extra fees. Your gold’s safety is guaranteed during the loan tenure.
  • Regardless of the price you initially bought the gold, the gold loan amount is calculated based on the gold loan rate today. This can be advantageous to you during a period of increasing gold prices.

Final thoughts

Instant Gold loan can improve your credit score if used responsibly. By making timely payments on your gold loan, you demonstrate to credit bureaus that you are a responsible borrower, who can help improve your credit score over time. Additionally, because a gold loan is a secured loan which is calculated as per the latest gold loan rate today or gold rate in India, lenders are often more willing to extend credit to borrowers with a lower credit score. 

It is important to carefully consider the terms and conditions of any gold loan you are considering and ensure that you can make the payments on time. A gold loan can be useful for those looking to improve their credit score while using their gold assets as collateral.