Whenever an individual is hit by a financial emergency, he can choose from several options including financial instruments and loans. While personal loans are one of the most popular options to address expenses, one can also opt for a loan against gold. A gold loan gives you quick access to finance without complicated documentation and waiting times.
Another impressive thing about gold loans is the lower interest rates associated with them. Lenders generally charge a lower rate of interest on these loans as compared to other financing options and products. Here is what you should know about these secured loans.
What is a gold loan?
A gold loan is a form of finance obtained by pledging gold articles to a bank or financial institution. The lender keeps the gold as collateral and lends the amount equal to a percentage of the worth of gold for a predefined tenor. At the end of the tenor, the borrower can pay back the amount along with interest to get back the gold items.
Where can you get a gold loan?
Most people choose banks and NBFCs to obtain loans against their gold jewelry. Almost all banks offer gold loans at varying interest rates and terms. Financial institutions also offer competitive rates and benefits on these loans to help borrowers access quick finances and pay back conveniently. Some NBFCs specialize in gold loans and introduce great deals on these services.
What is the minimum and maximum loan amount?
Each bank and financial institution has different limits for the loan amount an applicant gets against his gold. For example, SBI accepts gold loan applications from Rs. 20,000 to Rs. 20 lakh while the ICICI Bank offers up to Rs. 1 crore as a loan against gold. Muthoot Finance and Bajaj Finserv, on the other hand, have no maximum limit on the gold loan amount.
What is the tenor of a gold loan?
The duration for a gold loan also varies from one lender to another. For example, HDFC Bank offers loans against gold with tenors ranging between 12-24 months. The maximum repayment period for an SBI gold loan is 36 months. Bajaj Finserv offers flexible repayment options, giving you the ability to renew the loan at the end of every 12-month tenor.
What are the charges?
Personal loans, home loans, and gold loans generally require paying a processing fee which is levied as a percentage of the total loan amount. In the case of a gold loan, the borrower may also need to pay a valuation charge. It is the cost of evaluating your gold jewelry given as collateral. This fee varies between lenders.
Some lenders may also charge documentation fees and other costs that quickly add up. It is best to check with the bank or institution all the charges involved in the loan procedure before applying.
What documents are required?
To approve your loan against gold, your lender may ask for several documents. While different lenders have their own documentation requirements, most of them generally ask for proof of identity, proof of address, and photographs. Income proof is usually not required for a loan against gold because you are pledging your asset which can be sold in case you fail to repay the loan.
Interest Rates and Comparison for Gold Loan in India
Though gold loans have a lower rate of interest as compared to other types of loans, it is desirable to compare the options available and find the lowest gold loan interest rate to make it affordable and convenient.
Let us look at the top gold loans available in India and compare the interest rates to help you find the best match for your finances.
SBI Gold Loan
Applicants can obtain anywhere between Rs. 20,000 and Rs. 20 lakh at the State Bank of India. It also lets you choose from three different options with varying tenors, margins, and repayment structures. The interest rate for gold loans is 7.5% at present. Apart from this, borrowers are charged a loan processing fee of 0.25%.
Manappuram Finance Gold Loan
Dedicated to gold loan products, Manappuram has several schemes starting at Rs. 1000 and going up to Rs. 1.5 crore. The only problem is that most schemes have a tenor of only 90 days though it offers gold loans with repayment periods of up to 12 months. The interest rate on gold loans is 12% to 29% depending on the amount and tenor.
Bajaj Finserv Gold Loan
This company offers convenient and best gold loan with interest rates starting at 11.99%. The maximum loan amount you can request is Rs. 1 crore. It offers flexible repayment options, speedy loan processing, and quick disbursal. It also lets you renew the gold loan every year.
ICICI Gold Loan
At the ICICI Bank, applicants can obtain a loan amount of Rs. 10,000 to up to Rs. 1 crore against gold. It has a quick online gold loan application and processing system with a disbursal time of only 45 minutes. The bank charges anywhere between 10% to 20% on gold loans for repayment periods between three and twelve months.
Muthoot Finance Gold Loan
Again, this NBFC offers gold loans through multiple schemes where you can apply for amounts as little as Rs. 1500. There is no maximum limit on the loan amount, as far as you have sufficient collateral available. The rate of interest for gold loans is 12-27% and the tenor ranges from 30 days to 3 years. This means the company offers flexible options for varying needs and capabilities.
While a gold loan is a highly convenient option to meet a financial emergency, it is important to consider the interest rates and other factors before applying. Choose a reputed lender and make sure the loan amount, interest rate and tenor suit your repayment capabilities and financial goals.