Authorized lenders like Banks and Non-Banking Financial Companies(NBFCs) provide financial services to customers in need and want day after day all over the world and all year round. Lending loans are a primary part of their job. The Reserve Bank OF India approves these loans before ṭhey are available in the finance market. Loans are broadly categorized as secured and unsecured. For example, a gold loan is secured and needs an asset as collateral. A gold loan is advised to be availed from these lenders over unauthorized ones. But among these two, they vary in certain aspects which are to be considered solemnly before taking out a loan from them.
Banks :- Banks are financial providers registered under the Banking Regulations Act of 1949. They are government-authorized, providing many commercial services like depositing money, cash withdrawal, amount transactions, settlements, account holdings, locker services, and lending loans.
There are different types of banks, namely private banks, public banks, cooperative banks, and development banks. Private banks are owned by private individuals or societies or cooperations and highly commercial. SBI, HDFC Bank, Axis Bank, and Yes Bank are some of the private banks. Public banks are owned by central or state governments and are more service-minded than private banks by nature. Indian Bank, Indian Overseas Bank, Bank of Baroda are some of the public banks. Development banks are designed for short-term and long-term investment projects and are primarily in the development sectors of the finances. IDBI, IRCI are some of the development banks. Co-operative banks are majorly designed for rural India, and it concentrates on providing financial services to the agricultural and day laborers of the nation.
Non-Banking Financial Companies (NBFCs) :- Like banks, they are also financial providers legally licensed and registered under the Companies Act of 1956. The differences between a bank and an NBFC are that NBFCs can’t draw or issue demand drafts and are not involved in the transaction and settlement processes. Asset companies, infrastructure companies, and microfinance institutions are three primary divisions of NBFCs. UTI AMC, Muthoot Finance, Manappuram Finance are some of the famous NBFCs.
Financial companies are much more liberal and lenient on their rules and terms as opposed to banks. Though the documentation requirement is minimum in a gold loan, in general, NBFCs provide gold loans much more simply than banks that follow customs to the end. But, NBFCs tend to compensate for that lenience by charging high interest rates and additional charges( processing fee, commitment charges, TOD charges, etc). The loan amount sanctioned for a gold loan depends on the value of the gold and the rate of the gold on that day.
The Gold loan rate per gram starts at Rs 3,506. The maximum Loan To Value Ratio of a gold loan as per the RBI is 90%. However, banks and NBFCs can adopt the LTV ratio to their convenience. Most banks have a high LTV ratio(like 90% or 80%) than most NBFCs(75% or 80%). The processing fee is incurred for the processing and approval of the gold loan application. The fee varies from one financial lender to another. But banks and NBFCs charge the same amount more or less. The prepayment charge is procured if the borrower closes the loan account before the decided tenure date, and a gold loan preclosure fee is widely NIL in most banks and financial companies. Although, recently, the RBI banned NBFCs from collecting preclosure charges on floating term loans.
Manappuram gold loan is one of the highly reputed gold loans with exemplary features. The Manappuram gold loan rate per gram varies from Rs 3,506 and Rs 4,621. The LTV ratio is 75% in the NBFC, with an interest rate beginning at 7% per annum. The loan can be applied online or offline.
Also Read:- Four Gold Loan Eligibilities That Serve As An Advantage