A gold loan is a secured loan that you can avail against the mortgage of gold ornaments and other forms of gold. As per the RBI guidelines, you can avail upto 75 per cent of the value of the gold. It is one of the most accessible options to get funds, especially in a financial crunch, as it does not require you to submit any documents for income proof. In addition, the lenders even do not ask for your credit history or CIBIL score.
Moreover, if you have a low CIBIL score, you can avail yourself of Gold Loan to improve your credit score. Here is how a Gold Loan impacts your credit score.
Applying for a Gold Loan: If you make multiple gold loan applications with different lenders for a gold loan, it will lead to a hard enquiry on your credit report. Having numerous such enquiries usually indicates that you are in desperate need of credit. On the same side, if you apply for a gold loan through an online marketplace like MyLoanCare, you can easily compare rates, check eligibility and calculate EMI for multiple lenders at one place without affecting your credit score.
Credit Mix: One of the best ways to improve your credit score is to have a mix of secured and unsecured loans. At the same time, you can avail of unsecured loans if you have a good CIBIL. Gold loans, a secured form of credit, are a feasible option for both lenders and borrowers. There are multiple reasons for the same. These include easy eligibility criteria like no income proof or CIBIL Score requirement, online gold facility, higher loan amount, increasing gold rates and much more. Thus, a gold loan can help you get funds during times of emergency and achieve a credit mix of secured and unsecured loans.
Prioritise Timely Payments: While Gold Loan does not require any credit score, making timely payments of your loan can help you to improve your credit score. You can always opt for a longer tenure as a longer tenure will bring down the EMI amount, and thus you can repay the credit on time.
Prepayment of Gold Loans: Prepaying your gold loan before the predetermined loan tenure can also help you to improve your credit score. Before making gold loan prepayment, you must however check prepayment charges of lenders as you may end up paying off the extra amount over the usual amount.
Settlement of Gold Loans: When clearing your gold loan, ensure to receive a formal closure certificate for your gold loan from the lender. In addition, you must also cross verify that the account is Closed, not Settled. It is because a settled status of your account indicates that you paid a payoff amount lower than the original amount. It indicates your inability to repay and the subsequent loss suffered by the lender. It will thus harm your credit score.
Bottom Line: Without a doubt, a gold loan offers a chance of CIBIL Repair . Availing of a gold loan is also easy as it offers multiple advantages as compared to other forms of credit. Gold Loan rates are less than a personal loan, has easy eligibility criteria and minimum documentation requirements.
