Gold is deeply connected to Indian culture and tradition and is considered auspicious. Indians mostly buy this precious metal in the form of coins and jewellery. However, there are other ways you can benefit from this auspicious metal.
For instance, you can secure a loan using gold as collateral, an easy way to solve your long-term and short-term monetary crisis. Thus, if you are a loan seeker considering this option, here are some of the top benefits of a gold loan you must know.
Securing credit against your gold jewellery is one of the simplest and easiest methods to obtain funds, especially in an emergency financial crisis. Here are five gold loan benefits that can give you a reason to opt for one:
1. Quick Processing Time
The gold loan is a secured form of credit, which is considered less risky for lenders. The fact that you are pledging your gold as collateral keeps eligibility and documentation at a minimum.
Thus, the overall processing time to book this credit type is much less than unsecured loans. As a result, you can find lenders processing your application within a few hours to a day, making it one of the quickest ways to secure financing.
2. Attractive Interest Rates
The interest rates for gold loans are lower due to the collateral involved. You may find unsecured loans such as personal loans or credit card options without pledging your assets. However, the interest rates of these loans are significantly higher.
Gold loans offer attractive interest rates, even compared to other secured options such as home loans, mortgage loans, etc. This is highly advantageous when you are opting for a sizable sum.
The minor difference in the interest rates will save you substantially over the entire tenure. Therefore, gold loans are a viable option if you want to secure ample funding with smaller monthly repayments.
3. Minimal Documentation
Another one of the many advantages of a gold loan is that it requires minimal documentation. The documentation includes a simple KYC-based process, requiring only your address and identity proof. These may include your Aadhaar card, passport, voter ID, driving licence, or utility bills.
Moreover, a gold loan lets you secure monetary funding without having to show any proof of income or credit score, making it one of the most attractive options. Therefore, you do not need to stress about repayment or credit history.
4. No Foreclosure Charges
Most Non-Banking Financial Companies (NBFCs) have zero or negligible processing fees and other foreclosure charges. This is because depositing your gold valuables with the lenders allows you to secure credit instantly without much processing time.
Moreover, a gold loan does not include any pre-penalty charges. Therefore, minimal processing fees and zero foreclosure charges can save you from added expenses and reduce borrowing costs.
5. Complete Safety
Due to the convenience of online offers by most NBFCs, the process of opting for gold loans has become much more transparent and quicker. Your gold assets will be carefully evaluated as per industry-grade karat metres so that you receive the right amount for your deposit.
Additionally, most NBFCs offer high security and always keep your assets in their vaults. Therefore, you can retrieve your gold as soon as the repayment tenure is successfully over.
Gold plays a multitude of roles in securing your finances.
If you opt at the right time and from the right lender, gold loans can help you collect substantial credit quickly without the hassle of going through a long-drawn procedure. Availing a gold loan can get you the required funding if you weigh your requirements and risks and choose a lender wisely. Now that you know the benefits of taking a gold loan, you can decide if it's the right financing option.
On Bajaj Markets, you can explore a wide range of gold loan lenders and compare their offerings easily. This way, you can choose a well-suited option with the preferred interest rate and tenure with minimal formalities.
FAQs on Top Benefits of Gold Loan
Why do people prefer gold loans?
One of the most common reasons people prefer gold loans is their low interest rates.
In addition, gold, compared to any other collateral, is considered a preferable option for lenders as they can quickly sell it off in case of discrepancies. Being a secured form of credit, the processing time and fees for gold loans are significantly low.
Is there a tax exemption for gold loans?
Gold loans do not have tax exemption benefits for personal expenses, except for a few circumstances. According to several Sections of the Income Tax Act of 1961, you can only avail of gold loan tax benefits if you use the amount for home improvement, purchase or construction of residential property, business expenses, or asset purchases.
How can I avoid the gold tax?
Under Section 54F of the IT Act of 1961, you can save taxes by claiming exemptions after selling your gold assets. This regulation allows a tax exemption on capital gains when you sell your gold assets and employ it towards purchasing a residential property.
Can I buy gold without a PAN card?
No, in India, it is mandatory to have a PAN card or Aadhaar card to purchase gold worth ₹2 Lakhs or more. It is used as an income verification document and also helps to check your creditworthiness while applying for a loan.
Can I save tax by investing in gold?
You can save tax liabilities according to Sections 54F and 54EC of the Income Tax Act. According to the provision of 54F, if you reinvest the returns from your gold investment in residential property, you can get a tax exemption from the total earnings.
For instance, Sovereign Gold Bonds mature at eight years, with tax-free capital gains when you redeem them at maturity. On the other hand, as per the provision of Section 54EC, you can invest your returns within six months and save the entire tax from those earnings.
Can we get deductions in income tax with a gold loan?
You are eligible for tax exemptions of up to ₹2 Lakhs on a gold loan’s interest if the loan is utilised for buying or constructing residential property. This is as per Section 24 of the Income Tax Act, 1961. Additionally, you can also claim an exemption of up to ₹50,000 over and above the mentioned ₹2 Lakhs on the loan’s interest, under Section 80EE. To be eligible for this deduction the loan amount must be more than ₹35 Lakhs.
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