What is Gold Loan?
Gold loan is a type of secured loan i.e. the loan is provided against collateral in the form of different types of gold jewellery or gold coins. You have to deposit your gold with the lender i.e. NBFC or bank and you get the deposited gold ornaments or coins back only after you have paid back the loan amount in full including interest. Gold loan business, being secure, features short processing times, a low interest rate and short to medium term tenure. You can avail several gold loan schemes from banks and other financial institutions. The amount of loan against gold you will get depends upon the value of the gold you surrender for the loan.
Why to Choose a Gold Loan?
A few reasons for the popularity loan against gold are as follows:
- Gold loans feature a low interest rate as compared to most other loan options
- Gold Loans tenure ranges from a few days to 5 years or more depending upon the lender.
- The repayment options on gold loan can be selected as per the choice of the borrower.
- In most cases, the lender does not charge a pre-payment penalty on gold loans.
- Minimal documentation required and PAN Card is not mandatory for this loan
- Fast disbursement i.e. loan is provided within a few minutes to a few hours.
Gold Loans Features
- It is a secured loan. Therefore, there is no requirement of a good credit history to avail a gold loan.
- You have an option to pay only the interest component and the principle can be paid as a lump sum amount at the end of the loan tenure.
- For those of you involved in agriculture, gold loan schemes can be availed at a reduced rate of interest which can be as low as 8%.
- Since your gold is the collateral, which is deposited with the lender, the paper work involved is bare minimum. All you require is your personal id and address proof.
- The loan disbursal time can be as short as 5 minutes.
Gold loan Interest Rates
Most gold loan providers charge only a small percentage, usually 3% to 5% over the base rate when providing a gold loan. Thus for a base rate of 10%, the interest on a gold loan can vary from 13%-15% per annum. Gold loans feature a tenure that ranges from a few days to 5 years. The loan interest rate also tends to vary based on the tenure of the loan as well as the gold loan amount.
Compare Gold Loan Interest Rates*:
|Group Provider||Interest Rate (Annual)||Processing fee|
|HDFC Gold Loan||9.6% onwards||Nil to 0.5% of loan sanctioned|
|Muthoot Gold Loan||12% onwards||0.25% to 1% of loan sanctioned|
|Manappuram Gold Loan||Maximum of 26%||Varies on a case by case basis|
|ICICI Bank Gold Loan||10% to 16.5%||1% of loan amount|
|SBI Gold Loan||1 year MCLR + 2%||0.5% of loan amount with a Min. Rs. 250|
*The facts and figures provided above are indicative and subject to change from time to time.
Gold Loan Eligibility Criteria
There are no specific gold loans eligibility criteria to satisfy to get gold loan. Anyone can apply for gold loan, as long as the person seeking a loan owns the gold. The sanctioning gold loan is determined by the value of gold the borrower submits.
You can get gold loan if you meet the following criteria:
- The person should be above the age of 18 years.
- He should own gold
Documents Required for Gold Loan
Unlike other loans where documentation is an important part of the process, gold loan documents required to be submitted are only the basic KYCs like:
- Two passport size photographs.
- A copy of identity proof documents such as your passport, driving license, ration card etc.
- A copy of address proof documents such as your electricity bill, telephone bill, other utility bill etc.
Paisabazaar is here to help you find the Best Gold Loan
Paisabazaar.com is an unbiased comparison portal that allows you to analyze various online gold loan deals available in the market. As most financial institutions and banks offer gold loan with different criteria or specifications, it is important that you first check which ones you qualify for.
Paisa Bazaar gives you the leading-edge, and here are the reasons why: -
- You can check your gold loan eligibility
- Based upon your requirements, we offer you the best online gold loan schemes
- You do not need to rush to the bank for gold loan application because PaizaBazaar offers online gold loans from all the top institutions. You can apply directly for a gold loan at Paisa Bazaar without going through the hassles of visiting the gold loan bank branch.
- We offer you the best gold loan companies offers and schemes which you can compare against a broad list of parameters.
Gold Loan: Important Things to Know
- Lending institutions offer loan of up to 75% of the gold value, after checking the metal for purity and ascertaining the market gold prices.
- While gold jewelry is perfectly acceptable to any bank or NBFC as collateral, bars are not accepted and only specific types of gold coins are accepted as collateral by banks only.
- If the ornaments provided feature precious stones, they are valued only on the basis of the weight of gold in the ornaments.
Top Banks and NBFCs Providing Gold Loans in India
A majority of Non-Banking Financial Companies (NBFCs) and banks (both private and public sector) in India offer gold loans to individuals. Some notable NBFC players are Muthoot Financial, Mannapuram Finance and Bajaj Finserv, while key banks providing loan against gold include Axis Bank, HDFC Bank, State Bank of India and Allahabad Bank. You can find the complete list of banks and NBFCs in India that provide gold loans depending on your inputs by using our eligibility tool.
Things to Keep in Mind before Taking a Gold Loan
To get maximum returns and make wise decisions regarding your precious gold funds, you must keep the following points in your mind while you avail gold loan:
- Gold loans tenure are usually short, ranging from a period of 1 year to a maximum of 2 years. Therefore, the borrower should be sure about his repayment capacity for the loan within the stipulated time.
- Gold loan rates are lower as compared to other unsecured loans. But, gold loan rate of interest can vary from one lender to another lender. Therefore it is best to compare the available options.
- The amount of loan that will be sanctioned to you is limited up to 80-90% of the value of Gold, as per current market gold prices, that you pledge for the loan.
- Gold loans have the benefit of minimum documentation, faster approval and quick disbursal. The lender keeps your gold as a security for the loan and in case you default on your payments, he has the authority to confiscate it. However, it is very important to know the credibility of your lender as your gold stays with him for the loan tenure. Therefore, it is best to choose the reputed lenders with proven track record.
- Gold loan repayment must be done on time defaulting on payments can affect your credit score. Further, if you do not pay back the loan amount, the surrendered gold can be seized by the bank.
Gold Loan: Frequently Asked Questions (FAQs)
Q. What type of gold jewellery or coins is accepted as collateral for a gold loan?
Ans. Currently, all forms of gold jewellery including rings, necklaces, bangles etc. are accepted as security. Some banks accept specific gold coins of up to a certain weight, but gold bars are not yet accepted as collateral. In case the gold ornaments are encrusted with valuable gems, the valuation costs would not include the value of gems and your loan amount will be decided based on the weight of gold.
Q. What happens to the gold ornaments I use as collateral?
Ans. Your gold collateral needs to be deposited with the bank or NBFC, where it is stored in a secure vault with CCTV security as well as round the clock security presence. You will get the gold kept as collateral back once you have paid back the loan principal plus interest in full.
Q. Who decided the value of the gold I intend to use as collateral?
Ans. Most NBFCs and banks have in-house evaluators, who check the purity and weight of the gold to decide its value. Your loan amount is dependent on the estimate provided by the in-house evaluator and the gold prices on the date of evaluation.
Q. Is there an option for prepayment in case of a gold loan?
Ans. Usually banks allow borrowers to prepay their gold loan before the tenure ends and most of them do not charge any prepayment penalty. Others might charge a prepayment penalty which varies from lender to lender.
Q. I do not have a decent credit score for a loan, can I still get a gold loan?
Ans. Yes, you do not need to have a good credit score to avail a gold loan as the loan is a secured one. So, for gold loan eligibility you just need to have gold and those with low credit score or default repayments are eligible to get a gold loan. However, gold loan is taken into account in your CIBIL report and hence you should pay regular EMIs to improve your CIBIL score.