Gold, the auspicious yellow metal has not only significance for gifting in marriage, but it can be used to meet cash crunch in case of financial emergency. While there are different means for availing the finances, a gold loan can be considered an ideal option for meeting multiple personal and business needs.
What is a Gold Loan?
Banks and various non-banking institutions provide loans against gold to self-employed and salaried professionals against the mortgage of gold based on the value and purity of gold for a tenure of 1 day to 36 months. Banks also charge a processing fee up to 2% of the loan amount on a gold loan. Also, people fetch a gold loan at lowest gold loan interest rate, which makes it a feasible option.
Why is a gold loan a better option than other sources of finances?
No credit history: Unlike a personal loan and other loan products, you don’t require a credit history to avail a gold loan. The lending institutions are hardly bothered by the bad debts or if you have a lower credit score. Thus, you can avail a gold loan if you have a bad credit history.
Minimal documentation: The best part about taking a gold loan is that you don’t require to meet the income eligibility criteria. The process of getting a gold loan is easy, and you require minimum address and identity proof.
Interest rates: As gold loans are secured loans, the rate of interest on a gold loan is lower than the personal loan rates. Presently, Canara Bank provides gold loans at the lowest interest rate of 9.10% along with a processing fee of 1% of the loan amount. Other top lending banks which provide gold loans at nominal interest rate are SBI bank, IIFL bank and Axis Bank.
Here are interest rates for a gold loan of different banks:
|Bank||Interest Rate||Processing fees|
|SBI Gold Loan||9.15%||0.50% of the loan amount subject to a minimum of Rs. 500|
|Muthoot Gold Loan||12.00%||0.25% to 1% of loan amount.|
|Manappuram Gold Loan||12.00%||Rs. 10 (to be paid at time of settlement)|
|HDFC Bank||10.05%||Nil* to 1.50%|
|Yes Bank||11.25%||0.75%, Minimum Rs. 500|
|ICICI Bank||10.00%||1% of the loan amount|
Loan amount: You can get a gold loan upto 80% of the market value of the gold. Non-banking institutions may also provide loans up to 90% of the value of the gold. Banks check the purity and value of gold before giving the loans.
Repayment: Another reason why you must consider the gold loan is that it is easy to repay the gold loans. You can repay the gold loan using flexible methods such as bullet repayment, EMI scheme etc. Using these methods, you have the option to repay the principal amount and interest together or pay interest at the end, along with the principal amount of gold loan.
No restrictions on end-use: A gold loan unlike a loan against property or a home loan can be used for meeting expenses such as travel, medical expenses or for the wedding.
How can you get a Gold Loan?
Getting a loan is easy, and you can avail a loan by directly contacting the bank or else you can take a gold loan through any online marketplace. Most of the lending institutions also have the facility of providing the loans online. The online gold markets have spiked the demand for gold loans. Non-banking institutions mostly govern these markets.
Thus, the online gold markets have spurred the demand of gold loans in India, and the lending institutions are continuously making efforts to explore the gold loan markets and provide loans at lower interest rates and faster processing of loans than other loans.