Gold Loan: There is major news for the common people of India. Whenever there is an urgent need for money, many people resort to gold loan. Through this, a loan can be obtained for a short term with minimal paperwork. The interest rates on loans taken against gold pledge are lower than other types of loans. Its rates can range from 8.75% per annum to 24% per annum.
Banks and other financial institutions in India offer gold loans. The loan amount ranges from Rs 1500 to Rs 1.5 crore. The repayment period of these gold loans ranges from 3 months to 4 years.
These government banks have the lowest interest rates
Talking about public sector banks, Canara Bank is currently offering gold loan at the rate of 8.75% per annum. The processing fee in this is from Rs 500 to Rs 5000. Bank of Baroda is at second place with a rate of 8.90 percent. However, the final rate may vary depending on the applicable charges and GST. State Bank of India (SBI) is offering gold loan at the rate of 9% to 10.25%. There is also a processing fee of 0.50% and GST.
What are the interest rates in private banks?
Private banks like ICICI and HDFC charge higher interest rates on gold loans. ICICI Bank charges 9.25% to 18% and HDFC Bank charges 9.30% to 17.86% depending on the loan amount and tenure. The processing fee of these banks can also be up to 2% of the loan amount. Axis Bank, on the other hand, offers gold loans at a fixed interest rate of 17%, with a processing fee of 0.5% + GST.
What is the interest rate in NBFCs?
NBFCs i.e. non-banking finance companies like IIFL Finance and Muthoot Finance offer more flexibility but their interest rates are also higher. IIFL Finance’s rates start from 11.88% and can go up to 27%. Muthoot Finance offers loans at 22% annual interest, and also gives a discount of 2% on certain conditions.
The interest rate of Gold Loan depends on these factors
1. Price of gold in the market
If the price of gold is high in the market, then the value of your jewellery or coins will also be high. In such a situation, the bank or the loan giving company can give a loan at a lower interest rate because they feel the risk is less. If you are unable to repay the loan, then they can easily withdraw the money by selling the jewellery.
2. Inflation
When inflation is high, the rupee weakens and people start buying more gold. This increases the price of gold further. At such a time, if you take a gold loan, you can get a lower interest rate.
3. Your relationship with the bank
Most banks or loan lending institutions offer gold loans to their old customers only. But in some cases, people who have no previous relationship with the bank can also take gold loans. However, customers who are already associated with the bank have a better chance of getting a loan at a lower interest rate, as the bank considers them more trustworthy.