using gold to get a loan

Muthoot finance---an advertisement on TV and multiple advertisements the newspaper...all talking about taking loans against your gold... "Unlocking your locked investments"

Quite interesting... but does it make sense?

Here's my take.

Why would anyone need to pawn their gold? because they need money for -- something... maybe investments, maybe loans , education of their child.
In the above cases what are the options--- to go the bank for a loan or mortage something else.


So if we do go to the banks for loans- the interest rates for taking a personal loan is in the the range of 14-18% depending on your credit history and payment capacity.

In such cases-- going for loans against your gold is a great thing--

Muthoot finance charges you on 12% interest ( they dont give you the full value of your gold-- only around 90%)--  which is much cheaper than what the banks charge on a personal loan and the interest is also on a daily balance.
They also promise to get you the money in five minutes and promise to keep your money safe (http://www.muthootfinance.com/index.php)


However are there any other options?

if you do have an housing loan already with you- one can take a top up loan against it... usually at the existing loan rates-- which will be much below the loan against gold scheme or personal loan rates...

Gold is a huge bet against inflation and an economy that is highly unstable across the world.

Go for the loan against gold only if there is a dire requirement or if the personal loan is more costlier.

Happy investing

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