Even today, a country’s economic strength is often judged by the amount of gold reserves it holds. Governments sometimes even take loans by mortgaging gold. Similarly, common people frequently take gold loans as well. In this situation, we will guide you on how to take a gold loan, where to take it, and what important factors to keep in mind while applying for a gold loan.
For What Purposes Should You Take a Gold Loan?
You can take a gold loan for purposes such as children’s education, marriage, or emergency medical expenses. It is considered safer than other loans. However, a gold loan is ideal only when you need money for a short period. Before using a gold loan for significant expenses like buying a house or land, it is important to carefully consider the risks involved.
Should You Take a Loan from a Bank or an NBFC?
This depends on your convenience. Banks offer gold loans at lower interest rates, while non-banking financial companies (NBFCs) charge higher interest rates but offer larger loan amounts.
The main business of NBFCs is providing loans against gold, so gold loans are approved more quickly. However, you should compare the interest rates of different banks and NBFCs before taking a loan.
The advantage of gold loans is that they are cheaper than unsecured loans, such as personal loans, property loans, and corporate loans.
Which Option to Choose for Repayment?
Lending institutions offer various options to repay the loan amount and interest:
- EMI Option: If you are employed and receive a monthly income, you can repay the loan in Equated Monthly Installments (EMIs).
- Lump-Sum Payment: You can also pay the interest along with the principal in a lump sum at the end of the loan tenure.
Gold loans are typically offered for durations ranging from 3 months to 3 years. The loan term depends on your needs and the time frame within which you can repay it.
Additional Charges to Consider
Gold loans come with processing fees similar to other loans, which can vary between banks and NBFCs. Some financial institutions offer concessions on these fees.
- GST: GST is levied on processing fees.
- Valuation Fees: Some banks and institutions charge a valuation fee starting from ₹250.
- Other Charges: Additional fees may include service charges, SMS charges, and secured custody fees.
How to get a loan against gold?
The first condition for taking a loan against gold is that the gold you are pledging should be at least 18 carats pure. Banks or NBFCs give loans only against jewellery and gold coins. You cannot pledge gold coins weighing more than 50 grams. Financial institutions do not pledge gold bars either.
What if you default on the loan?
The general rule of loan applies here too, if you are unable to repay the loan on time, then the financial institution has the right to sell your gold. Also, if the price of gold falls, you may be asked to pledge additional gold.
Top 5 Banks Offering Gold Loans with Best Interest Rates
- HDFC Bank – Interest rates start from 9.50% with fast processing.
- ICICI Bank – Rates begin at 9.25%, offering flexible terms.
- SBI – Gold loan rates start at 9.50%, with long-term options.
- Muthoot Finance – Rates start from 10.00%, with high loan amounts.
- Manappuram Finance – Offers rates from 9.00%, with flexible repayment options.