InvestorQ : What is a gold loan? Why does a person take a gold loan?
Ashok Patkar made post

What is a gold loan? Why does a person take a gold loan?

Karim Sahu answered.
3 years ago

A gold loan is a loan a customer takes by pledging his/her gold as a collateral.

Gold as collateral can be in any form- jewelry, coins, biscuits, bars, etc.

A percentage of the value of gold that is pledged is sanctioned as loan to the customer.

Gold loans are usually short-term loans and its repayment period can vary from one month to a few years.

A gold loan is the solution for a person, say a businessman or a homemaker, who needs money urgently for some immediate expenses.

The person may not have cash lying with him/her but has gold coins or jewelry and can pledge the same in return of some money.

Thus, it is a financing solution for someone who needs cash urgently and has some gold belongings as well.

Although it is similar to credit card borrowings or personal loans, it must be noted that applying and getting a gold loan is way easier than any of the other loans mentioned above.

Also, credit card borrowings and personal loans usually carry a higher rate of interest, thus making common man prefer gold loans over them.