Gold Loan May Solve Your One Crisis but Could Create Another

Gold loans are considered the last resort to a financial crisis in India. People do not wish to, but are ready to give their gold jewellery and coins to obtain a loan sum against their value. This can be for various kinds of emergencies, such as medical emergency, marriage, education, etc. Gold loans are an easy way also to get funds arranged within a short span of time. As much is the value of your gold, so is the value of the sum you get as the loan amount.

So, can there be drawbacks to gold loans being used in crisis?

Well, there are pros and cons to everything, and so are there to gold loans too.

What are the Benefits of Gold Loans?

Gold loan comes as a solution your financial emergency and brings the following advantages:

A Quick-Fix for Your Financial Issues

No doubt, gold loans are a very simple and straight forward way to collect funds for your goal. It serves as a swift as well as immediate solution to your pressing financial needs. You do not even have to wait too long unlike the other loans. Here, the disbursal is quick, making it feasible for you to take complete benefit of the gold loan.

Free from the Glitches of Credit Check

When applying for gold loans, unlike other loan types, the need to have a good, high credit score is not required. As we know, credit score plays a major role in letting you borrow credit products. However, gold loans do not necessitate this need. Hence, even with a low, poor or even no credit score, people can simply get the money they want.

So, why do we say that they might create another crisis for you?

You may also like "Bank Gold Loan Vs NBFC Gold Loan"

Drawbacks of Gold Loans

The following reasons justify why taking gold loans can prove risky later on:

Stress Creation

As said, pledging gold as collateral for money is not something people in India do easily. If they choosing this resort, it means they are in a serious lack of money to even survive. This is definitely a reason for much stress. It tells you of the financial stress that's looming on you. In fact, taking a loan, whether it be a gold loan, can prove to be stressful because you also have to repay a larger amount due to interest addition.

Saying Bye to the Sentimental Asset

Gold assets in India are usually worn by women. Selling or using them to arrange funds is one difficult thing, while losing your cherished gold items like jewellery is another. Gold may prove to be a quick fix to your financial emergency, but then your savings in the form of gold are gone for now, along with the cherished beautiful ornaments you used to wear.

Coming Debt Trouble

Most importantly, you are now in a greater debt. Having borrowed a gold loan, you are now supposed to pay a higher sum to get the gold back, that too, within the planned time frame. Gold has simplified the matters, but it can now complicate the same when the repayment plan is not well-defined. The obligations on your shoulders may even get on multiplying with time, if not handled properly in the beginning.

Hence, even gold loans are actually loans or credit products only that need you to repay a larger sum within a tenure decided. When EMIs are missed, the total payable amount further rises. They are ultimately a liability with possible positive and negative consequences.

However, there are ways to handle the situation better.

Don't miss this! "What Happens If You Don't Repay Your Gold Loan?"

Taking Gold Loans with a Strategic Mindset

Here are some of the ways you can use a gold loan for your financial needs, but with a better approach:

• Start by assessing your financial landscape to know whether this will be a wise decision or not; you need to make informed decisions
• If you are in debt, give priority to getting rid of those debts first, specifically when your current financial need can be set aside a while
• Check the loan repayment terms so you do not end up choosing a plan that does not suit your earnings
• You may also consider alternatives like debt settlement, debt consolidation, etc.
• You need budgeting done with wisdom so that you are able to enjoy the gains that come with proper decision making.

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