In our modern living, one of the top factors that we tend to focus on is financial security. Our defensive mentality tends to make us think that sometimes income and savings may not be enough during the time of an emergency. So, the last thing one can think of is getting a loan.
Even though there are numerous types of loans available, but then everything has its pros and cons. So, when it’s about deciding on borrowing, the gold loan may come to your rescue considering its advantages.
How Can Borrowing Of Gold Loan Affect Your Credit Score?
The growing awareness of numerous financial products among the consumers has made credit score an excellent financial tool for estimating the credit and loan behavior of the borrowers. The financial institutes and banks follow the credit score before providing credit to the consumer. Also, always note that having a regular credit score check is very important. The calculation of the credit score is done based on the Credit Index Report (CIR), which is maintained by the CIBIL.
The CIR keeps track of the credit and repayment history of the borrower, which makes it easy for the lender to rank the borrower accordingly. Currently, an ideal credit score for the borrower is 750 and above. Hence, having a higher credit score can increase the chance of getting fast loan approval.
Now let’s see how borrowing of a gold loan can affect your credit score:
The Capability of Loan Repayment
Financial experts always recommend to only opt for the gold loan if you have a regular source of income. In addition to that, the source of revenue should be more than sufficient to repay the gold loan in time, without affecting your noticeable expense and regular budget. Ensuring your ability to timely repayment of your investment will not only help you in maintaining a good credit score but also in avoiding defaulting or late payment.
Current Gold Valuation
Before applying for a gold loan, the financial experts always suggest for checking the annual rate of gold in the market. So, that you can avert the default and the loss of your collateral gold articles, moreover, it will also adversely affect your CBIL score. And then, the CIR will not update your loan status as evident but as settled, which means your credit score will get lower in CIBIL record.
How Can You Ensure Higher Credit Score With Gold Loan?
There are specific steps following which can help you in ensuring a higher credit score with the gold loan:
- Timely repayment – Make sure that you pay your EMI payments on time. These will help you to have a good credit score against your gold loan.
- Avoid collateral auction – When it comes to the delayed repayment of the loan or problem of default, this medium is more flexible. It gives borrowers the time to avoid the collateral auction.
Gold Loan – The Cost-Efficient Solution for improving your Credit Score
Borrowing and prompt repayment of the gold loan can help you to improve your credit score. Moreover, the overall procedure is not only flexible and cost-efficient but also helps you in having a better preference when it comes to further borrowing of the loan.
Let us brief down and conclude the total summation to make it easy. Before you proceed to take any loan, having a strong portfolio is a must. These are the basics which are followed regularly will make the entire process easy. Secondly, always be credible, honest while proceeding any transaction. In a rare case, some people follow the practice of defaulting a loan. This is not good, and one should altogether avoid this practice. Be prepared to bear the penalty as you cannot hide in front of the strict laws of banks. It will impact your credit score, lowering it. Thereby, there are issues in terms of getting credit and loans.
In the case of extreme situations, the bank can also take away the gold jewels from you.
Also, we understand we are running through the day and might miss out on so many things. The best way can be to follow the set of transactions. You can set a reminder on your mobile, computer, and another kind of device. Also, the auto-debit system is considered to be good.