Debunking Common Gold Loan Myths

Gold is not only considered a symbol of wealth and prosperity but is also seen as a valuable resource that can be utilised during times of financial need. Gold loans have gained popularity in recent years as a convenient way to access funds quickly by using gold as collateral. However, there are several myths surrounding gold loans that often deter people from availing them.

In this article, we will debunk the top 10 gold loan myths and shed light on common gold loan truths. By understanding these common misconceptions, you can make informed decisions about utilising the value of your gold assets.

10 Gold Loan Myths Debunked

Myth #1 - You Will Lose Your Gold Forever

Among the common misconceptions is that taking a gold loan means losing your precious jewellery forever. The truth is that when you avail a gold loan, you pledge your gold assets as collateral to the lender. Once you repay the loan amount along with interest, your gold will be returned to you in its original form.

Myth #2 - Gold Loans Have High Interest Rates

One of the most prevalent gold loan myths is that they come with exorbitant interest rates. While it is true that interest rates vary across lenders, gold loans usually have lower interest rates compared to personal loans or credit cards. 

Myth #3 - Only Jewellery Can Be Used As Collateral

Among the common misconceptions is that only jewellery can be used as collateral for a gold loan. The real gold loan truth is that gold coins, bars, and even gold biscuits can also be pledged to avail a gold loan. As long as the gold is of a recognised purity and weight, it can be used as collateral.

Myth #4 - Your Credit Score Determines Loan Approval

Among other gold loan myths is that your credit score determines approval. In fact, it among the common misconceptions as credit score does not play a significant role in the approval of a gold loan. Since the loan is secured by the collateral (gold), these loans are accessible to individuals with lower credit scores or those who have no credit history.

Myth #5 - You Have to Repay the Loan in Lump Sum

Another the common misconception is that gold loans need to be repaid in one lump sum payment. The actual gold loan truth is that most lenders offer flexible repayment options, allowing borrowers to repay their loans in monthly installments. These installments are called Equated Monthly Installments (EMIs) and consist of both principal and interest components.

Myth #6 - You Can Only Avail Small Loan Amounts

While it is true that the loan amount you can avail depends on the value and purity of your gold assets, it is not limited to small amounts. Depending on the lender's policies and evaluation of your gold assets, you can receive substantial loan amounts through gold loans.

Myth #7 - Taking a Gold Loan is Time-Consuming

Some people believe that availing a gold loan is a time-consuming process. However, with the advent of digital lending platforms and the use of technology, the process has become quick and hassle-free. Many lenders provide the option to apply for a gold loan online, making it convenient and efficient.

Myth #8 - You Need Income Proof to Avail a Gold Loan

Among the other gold loan myths is that gold loans need elaborate documentation. However, that is among the common misconceptions. Unlike other types of loans, gold loans do not require income proof or extensive documentation. Since the loan is secured by your gold assets, it is an attractive option for individuals who may not have a regular source of income or formal employment.

Myth #9 - The Lender Will Keep Your Gold in Their Possession

Among the other common misconceptions is that once you pledge your gold assets as collateral, the lender will keep them in their possession throughout the loan tenure. In reality, most lenders provide safe and secure storage facilities where your gold is kept until you repay the loan. These facilities ensure the safety and security of your precious assets.

Myth #10 - Gold Loans Can Only Be Availed by Farmers

There is a common belief that gold loans are exclusively available to farmers or individuals engaged in agricultural activities. However, this is far from the real gold loan truth. Gold loans can be availed by anyone who possesses gold assets of recognised purity and weight, regardless of their profession or occupation.