Why Millennials Should Opt Gold Loans Fund Personal Needs

1. Introduction

• Growing financial needs of millennials: Lifestyle inflation is growing at a faster pace than incomes, leading to a growing deficit in the residual money with the individuals to bear expenses. This is magnified in millennials since this age group in general is currently closest to being the responsible adults.

• Increasing preference for secured borrowing options: With increasing expenses and inflation, the need for sustainable borrowing has also increased. Unsecured loans may not be suitable for individuals since it heavily depends on the eligibility criteria, credit profile and income of the individual applicant. Hence, a solid secured borrowing option like gold loan is becoming increasingly popular since there are minimal barriers to entry, and the loan is not determined by the individual’s income proof or credit history.

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2. Understanding Gold Loans

• What is a gold loan?: Gold loans are a type of collateral backed lending where the borrower’s gold serves as a security to help avail a loan. These loans have identical commercials to any other type of loan. Once the loan is repaid in full including the principal, interest component, and any applicable charges, the gold collateral is given back to the borrower.

• How it works: Gold loans are no different to any other collateral / asset-backed loan. The borrower’s asset (gold) serves as a security for the lender. Upon complete settlement, the gold collateral is given back.

3. Quick Access to Funds

• Fast processing and approval: Gold loans provide an extremely quick access to funds when compared to traditional unsecured loans like personal loans. This is due to the fact that the assessment for gold loans doesn’t take as long since it is a collateral backed loan. Also, modern lenders like indiagold have digitized the loan journey which further adds to the customer convenience and allows the borrowers to avail loans at a lightning quick speed.

• Ideal for emergencies and short-term needs: Since gold loans take much less time for processing, these tend to be the ideal choice for the borrowers who require loans to fund an emergency or urgent expense.

4. Minimal Documentation

• Simple eligibility criteria: Gold loans are easy to avail since the eligibility criteria for these loans is pretty simple and straightforward. Unlike other loans like personal loans, there is no minimum credit score requirement, and the applicant’s credit profile does not play a substantial role. Even the documentation requirement is easy to fulfil.

• Limited paperwork compared to personal loans: Gold loans require minimal documentation as compared to personal loans. Unlike personal loans where the applicant has to submit, address proof, KYC documents, income proof, bank statements and much more, for gold loans you would only require basic KYC documents, and address proof. There is no requirement for income proof and even the assessment timeframe is shorter in case of gold loans.

5. Lower Interest Rates Compared to Unsecured Loans

• Secured nature reduces lender risk: Since gold loans are a type of asset-backed loans which are secured by the borrower’s gold collateral, the gold serves as a security for the lender since it can be auctioned to recover the dues in an event of a default by the borrower. Since the gold mitigates the lending risk undertaken by the borrower, the benefit is passed onto the borrower in the form of lower interest rates!

• Cost-effective borrowing option: Gold loans are an extremely cost-effective borrowing option available in the market. When compared to unsecured loans like personal loans, gold loans attract a lower interest rate, and lenders like infagold offer best in segment fees, which makes the overall loan proposition really attractive from a cost lens!

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6. No Heavy Dependence on Credit Score

• Suitable for millennials with limited credit history: Gold loans are extremely suitable for millennials and gen z who might have a limited credit history. Since these are asset-backed loans, the borrower’s credit profile or credit score does not impact the eligibility.

• Easier approval compared to personal loans: Gold loans application process is simple and quick. The assessment and approval is fairly uncomplicated especially in the case of trusted lenders like indiagold.

7. Flexible Repayment Options

• EMI option: Gold loans often allow the borrowers to repay the loan amount in the form of EMIs. Each EMI includes a principal as well as interest component, and at the end of the term, the entire payable amount is repaid. This allows the borrowers to repay the liability efficiently.

• Bullet repayment option: Lenders also offer bullet repayment options which allows the borrowers to pay regular interest payments, and some components from the principal as per the borrower’s convenience. This provides a great flexibility to the borrowers.

• Short tenure flexibility: Gold loans generally come with a short loan tenure of 1 year. This allows the borrowers to quickly repay the loan and also pay less amount in the form of interest.

8. Ideal for Various Personal Needs

• Medical emergencies: Gold loan is ideal for medical emergencies as this loan offers an extremely quick assessment and disbursal. indiagold offers loan disbursal in as low as 30 minutes!

• Travel: Gold loans are great for arranging funds for travel expenditure. These are low cost, short term borrowing options, which makes it ideal to fund such expenses.

• Education: Education inflation is at an all-time high, funding education expenses can be difficult especially in an event where the individual is unable to arrange for funds for the expense. Since gold loans are low cost and easy to avail borrowing options, these tend to be the perfect option for such expenses.

• Business or startup expenses: Setting up or operating business can be capital intensive. If you’re looking to borrow then it is crucial to opt for a cost-effective borrowing option. Gold loans are among the most cost-effective borrowing options available in India. This makes gold loans an ideal choice for borrowers looking for funds to infuse in their business.

9. Risks to Consider

• Risk of gold auction on default: One of the biggest risks that the applicant should always account for is the risk of losing the gold. Since gold loans are backed by the applicant’s gold, the gold serves as a security for the lending risk undertaken by the lender. In an event of a default on loan by the borrower, the lender reserves the right to auction off the gold collateral to recover the dues. Hence, it is crucial to actively track the loan, repay the loan on time and always borrow responsibly

• Importance of repayment planning: Repayment planning plays a huge role in effortlessly paying-off of the liability. Having a repayment plan in place can essentially help to repay the loan without being under undue stress to arrange for funds to meet the liability. Borrowing responsibly is an important aspect of the planning process as a whole.

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