Does Gold Loan Impact my Credit Score in Anyway?

Gold Loan is a secured loan that helps individuals in improving their credit score progressively. Since this loan is procured in exchange for gold ornaments, coins, etc. it is seen more useful in getting a good credit score. Not long ago, just a few couple of years back, procuring gold loan was considered awful as people believed that those who do not get a loan from anywhere else generally apply for a gold loan by keeping their gold jewelry on a stake. This negatively impacted the people’s credit score that time. However, this is not the case today because the government is doing its best to persuade people to use their ‘idle gold’ in a lucrative manner. Hence instead of keeping your gold jewelry or coins in safes and lockers, it is good to put it to better use. Applying for a Gold loan in unexpected crisis is a way better option than personal loans for the reason that personal loans are available at higher interest rates of 16-25% while the banks charge 13-14% on loans against gold. Nevertheless, keeping gold as collateral is an idyllic way to quick loans. Here is the list of scenarios wherein gold rules the CIBIL/credit score:- 1. If you own a considerable amount of gold to keep it as collateral, your documentation process to get a loan will be simpler and hassle-free as compared to other loan types. 2. Considering the interest rates on home, car, and personal loans, the banks offer gold loans at competitive interest rates. Also, the documentation or the paperwork involved in getting a gold loan is less intrusive. In fact, the loan application is processed and approved in a day or two. 3. The scores demonstrated by the TransUnion Credit Information Bureau (India) Limited prove that the individual’s credit score has a huge role in procuring personal loans and can have negative impact to the same extent if you miss payments. However, as far as gold loan is concerned, it will have a positive effect on your Credit Report if you make regular payments, yet another reason why gold loan is rising in popularity. 4. Banks offering gold loans do not ask for numerous documents, just an income or address proof or sometimes both are required. Also, a jewel loan requires no credit score. Other important things on Gold loan: a.) By pledging your gold ornaments and coins, you avail up to 60 percent of the value of gold ornaments. b.) As compared to unsecured loans, banks are always comfortable lending money against security. This is perhaps the reason why Loan against gold are sanctioned, processed and disbursed quickly in a few hours only. c.) Government provides benefits to those applying for gold loan d.) Instead of keeping your expensive gold in safes and lockers, your gold coins and ornaments can be put to better use when you keep it as collateral. In the beginning, there were quite a few small firms including pawn shops, local fund sponsors which provided loans against gold on a very small level to empower those looking to get some money by pledging gold jewelry. However now with the growing demand for gold loans, many top banking institutions including private lenders in the country are entering into this segment and offering gold loans at competitive interest rates. The Bottom Line While you apply for a gold loan, persistently choose the reputed bank and make sure you treat this loan just like a home loan or a mortgage loan and make every single payment on time. Besides paying off your loan EMIs on time, complying with all other guidelines is also essential to boost your credit score in the long run.