It's a time when several individuals are facing a serious cash crunch, due to the Covid-19 pandemic. This is true for individuals who have lost their job, or professionals impacted by the closure or businesses where lockdown have forced a closure.
We have received emails from readers seeking loans, though we are not in that business. The best option during a Covid-19 crisis is to go for a gold loan. Here are some reasons why gold loans are the best.
Way cheaper than personal loans
If you go for a personal loan, the amount of interest charged could range from 12 to 18 per cent. Gold loans come at an interest of around 12 per cent.
There are no processing fees and no prepayment charges either. Personal loans tend to attract a prepayment charge of 2 to 4 per cent. If you pre-pay a principal amount of Rs 2 lakhs, you could end-up paying as much as Rs 8,000 extra. This is a tidy sum, which can be avoided by taking a gold loan instead of a personal loan. One can approach many of the specialized gold loan companies like Muthoot Finance and Manppuram Finance.
Take less than an hour to disburse
If you avail a personal loan, it could take easily 48-72 hours. While most banks promise speedy disbursal, it could take a minimum of 2-days. Gold loans on the other hand do not take less than an hour to disburse.
You walk into the branch with your Aadhar Card and gold jewellery and it could take less than 1 hour to disburse. Of course, gold loans are cheaper and faster, simply because there is a collateral in the form of gold that you are keeping with the gold loan company. They will encash the same in case you fail to pay the gold loan.
In the case of personal loans, the interest rates are higher because there is no collateral and the bank is taking a risk.
Make sure you are able to pay the gold loan
It's important to remember that you have pledged your gold for a gold loan and you should be able to pay the same back. In case you are unable to pay the same back, you might end-up losing your gold jewellery. Also, gold loans do not have an EMI, so you just need to pay the pending interest and when you have the resources you can pay the principal amount.
About the author
Sunil Fernandes has spent 25 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning.