Blog #Goldloaninterestrates

Loans can be taken through friends, family or specialized credit lensing agencies. Loans from friends and family can be interest-free but they can put you in awkward relationships. Other options include personal loans, loans against Fixed deposits, Gold loans etc. Personal loans can be highly expensive when it comes to cost and interest. Loans against Fixed deposits and life insurance come with limited loan amounts. Gold loans however are the cheapest and most profitable in this case. With the lowest document requirement, lowest interest rates and negligible other costs, gold loan stands a clear winner among other loan products. 

Let us understand in detail, what makes gold loans the most profitable and cheapest option:

Lowest interest cost

Gold loans have interest rates ranging from 7 - 18 per cent approximately. This is the lowest you will get on any loan that doesn't have the restriction on its end use and at the same time doesn't have a lower maximum amount ceiling. Therefore, you're saving in terms of the lowest interest rate, with the benefits of flexible end-use. Check the Gold loan interest rates of various credit lending agencies here.

Lowest processing charges

The processing charges are found only in this loan product. It's as low as 1 per cent! That Is owing to the technological advancement we have now. The XRF technology being used in most leading banks has significantly reduced the time and cost that the previous methods took. Taking about other loans such as personal loans, they charge very high processing fees, around 5 per cent. 

No prepayment charges

If you don't already know what are prepayment charges, replacement charges are the money charged to you if you pay more money than the EMI for the month. This is because the extra money is deducted from the principal amount which then reduces the interested borrower pays on the leftover months. Since this reduced interest means reduced profit for the lender, they cover it up with extra prepayment charges.

In the case of gold loans, the interest for the whole tenure, usually, is calculated beforehand and is the same for every month. This means that the interest is not charged on the leftover amount but the beginning amount all at once! Therefore even if you prepay, there is no loss to the lender that is why they don't charge anything.

No Foreclosure Charges

Foreclosure or full prepayment means closing the loan by paying before maturity. Now same as mentioned above since paying any amount before the maturity does not affect the interest payment to the lender, they do not charge any fees on foreclosure. 

No hidden charges

Most of the Gold loan products has only these charges- interest fees and processing fees. Therefore you need not worry about other fees. 

No income criteria

Even if you don't earn any income, you are eligible for a Gold loan. This is because, in India, Gold is not just seen as jewelry or an investment, it is seen as a pious metal that is perpetuated in families generation after generation. Some families even hold gold ornaments that are a century old! 

Lowest documents required

You just require identity proof and address proof for being eligible to get a loan against Gold. For identity proof, you can bring in your Aadhaar card, PAN card, driving license etc. For address proof also you can bring your Aadhaar card, passport, PAN card etc. Just two documents and you are good to go. Look for the nearest branch of the credit lending agency you are thinking to get a loan from by writing credit lending agencies name followed by 'near me' for instance: Manappuram gold loan near me. Similarly, you can find the nearest branch to any agency. Loans against Gold have proved to be the most profitable loam product for people in need for centuries and is still growing to be more and more popular every day. 

Also Read:- SHOULD WE AVAIL OF A GOLD LOAN OR HOME LONE TO BUY A HOME 

Gold ornaments and bank minted gold coins can help the borrower to get a gold loan, evaluated on the basis of overall gold value. Among many other reasons people prefer gold loans over any other loan which are affordable in terms of gold loan interest rates and other facilities. The application of a gold loan is primarily divided into four parts: submission of gold, evaluation of gold, official documentation work, and the authentication.

Gold loans are going good in the rising market of loans. But if a person does not have enough capacity to repay the loan amount, it is better to avoid the loan against gold. The amount of repayment includes the principal amount borrowed from any bank or NBFC and at Sab the interest attached to it. One must know the advantages of getting a gold loan before deciding to choose the secured loan facility provided by it. If a person is looking to get funds against gold jewelry, these advantages can help him.

For every individual who wants to get a loan facility with lower interest rates, a gold loan can be the preferable option as they secured loan charges at budget-friendly interest rates. The gold that the borrower raises must be within 18 to 24 carats as this acts like the whole lateral against the loan amount. The interest rates of gold loans generally range from 9 % to 20% per annum, but on average, it can range from 10 % to 16% per annum depending upon various factors and the lending institution. If a person has already maintained a good relationship with the bank, it can enhance the chances of gold loan approval, and the lender can provide him with lower loan rates. State Bank of India provides Gold Loan at the interest rate of 7.5 %; the ICICI bank provides it within the range of 10 % to 19.7 6%, HDFC Bank provides it from 9.5 % to 17.5 5%, Muthoot Finance Gold Loan interest rate ranges from 12 % to 27%, and Manappuram gold loan rate per gram depends upon the interest rate of minimum of 12% and maximum to 29%.

Assess the person to get maximum loan amount against SBI gold pledge by him as bi loan to value ratio determined by most banks and NBFC range from 65 % to 90%. This means that a person trying to get a gold loan pledging his gold can 90% of the overall value of the whole depending upon the weight and purity and, in the worst case, can get as low as 65% of the value. Further, the loan borrower gets the freedom to choose the repayment option according to his convenience when he applies for a gold loan facility. Repayment is the most integral part of any loan, and gold loans have different repayment methods. The most famous four methods are the EMI method, interest payment at regular interval method, upfront interest payment method and Bullet repayment method. If a person is in emergency need to get fund, then a gold loan can be the best alternative as the loan amount gets disbursed faster than any other type of loan.

This is because the procedure of documentation and authentication is done swiftly, and the loan amount gets disbursed into the borrower’s savings account. Moreover, the loan application does not get rejected multiple times by the lending institutes due to poor credit history or low credit score. Therefore a gold loan becomes an acceptable option for people who do not have a remarkable credit history in giving the loan amount back. The reason behind this is the security provided by the borrower in the form of gold ornaments or Bank minted gold coins to the lender.

But there are a few constraints of gold loan that must be taken into account. If the repayment of the gold loan is not made timely, the borrower may lose his assets, which can further impact his CIBIL credit score negatively. So it is advised to repay the gold loan amount on time to save the gold and keep the credit score stable.

Read More:- Should I Avail Gold loan