Going For A Gold Loan? Check Which Banks Are Offering The Best Rates

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Going For A Gold Loan_ Check Which Banks Are Offering The Best Rates

In India, gold has always been a great asset. The yellow metal as well as gold loans come in handy during cash crunch or financially stressful situations. When an individual applies for a gold loan, banks keep gold jewelry or other gold objects as collateral. Gold loans enable individuals to access funds without having to sell their gold. However, if the borrower defaults repeatedly, then the gold is auctioned off. Banks warn borrowers in case of repeated defaults before they auction the gold.

Before you apply for a gold loan, you need to check the following details:

1)There Is No Credit Score Requirement For A Gold Loan

A credit score is not necessary for getting a gold loan. The main factor involved in getting a gold loan is the purity of the gold that you are going to pledge as security or collateral. Thus, gold loans come in handy for those who do not have a good credit score or have a nil credit score.

2) Types of gold that banks accept

Most banks only accept gold jewelry and the purity of the gold must be between 18k to 22k. It is essential to note that lenders do not accept gold bars in the form of collateral.

3) Maximum Loan Value

Multiple banks offer gold loans for a loan to value ratio (LTV) capped at 75% of the existing market prices of the yellow metal. The reason why the LTV ratio is fixed at a high value is to increase the borrowing capacity of citizens. According to the RBI official website, for gold loans, the pledge of gold jewelry or ornaments must not go beyond 75% of the value of gold jewelry or ornaments. For instance, if you decide to pledge gold worth Rs. 100,000, then the maximum loan amount that you may get is Rs. 75,000.

4) Gold Evaluation And Loan Sanction

It is essential to determine how a gold loan works. You should know about the evaluation and sanction procedure. The bank will evaluate the gold given as collateral post which the maximum loan amount that you are eligible for is determined and the interest rate is levied on it. You as a borrower have flexibility to choose the loan repayment period which may fall in the range of 6 months to 24 months.

5) Factors Affecting Gold Loan Interest Rates

Price of gold in the market:

If the price of gold is high in the market, the value of the gold ornaments or coins pledged by you as collateral will also be high. Lenders will offer you a lower interest rate, and in such cases, since the risk associated is low, if you are not able to pay the EMIs on time, the lender can easily recover the outstanding amount due by selling or auctioning the gold ornaments.

Inflation:

If the rate of inflation is high, the value of currency decreases and hence, people tend to accumulate more gold. Gold acts as a precaution against inflationary conditions especially when they last for a longer period. This in turn steps up the prices of gold and in such times, if you wish to obtain a gold loan, you may get lower interest rates from lenders.

Relationship with the bank:

Existing customers of a bank or financial institution tend to get lower interest rates. But, financial institutions also give loans to customers who do not have any relationship history with the bank.

Banks and NBFCs That Are Offering The Best Gold Loan Rates

1:Bank of Maharashtra

  • The gold loan scheme is called Maha Gold
  • The interest rate is 7 percent per annum
  • The maximum loan amount is Rs. 5 Lakhs
  • The minimum loan amount is Rs. 20,000
  • The processing fee is Rs. 500 to Rs. 2000 plus GST.
  • The maximum repayment period is up to 12 months

2:State Bank of India (SBI)

  • SBI offers two gold loans -Personal gold loan and Realty gold loan.
  • The interest rate is 7.50% per year
  • The maximum loan amount is Rs. 50 Lakhs
  • The minimum loan amount is Rs. 20,000
  • The processing fee is 0.25 percent of the loan amount (minimum of Rs. 250) plus applicable GST.
  • The repayment options are flexible and are between 12 to 36 months.

3:Canara Bank

  • Canara Bank offers three categories of gold loan schemes Agricultural – Swarna gold loan schemes, and MSME gold loan schemes.
  • The interest rate is 7.35 to 7.65 percent per annum
  • The maximum loan amount is Rs. 35 Lakhs
  • The minimum loan amount is Rs. 5000
  • The processing fee is 0.50 percent of the loan amount – The minimum is Rs. 500 and the maximum is Rs. 5000 for Swarna loans.
  • Flexible repayment options in the range of 6 months to 2 years

4:Punjab & Sind Bank

  • The rate of interest is 6.80 to 7.5 percent per annum
  • The maximum loan amount is Rs. 25 Lakhs
  • The minimum loan amount is Rs. 1 Lakh     
  • The processing fee is Rs. 500 for a loan up to Rs. 2 Lakhs and 0.50 percent of the amount for a quantum of loan capped at a maximum of Rs. 10,000.
  • The maximum repayment period is up to 12 months.

 5) Indian Bank

  • Indian Bank offers gold loan schemes to borrowers from the middle and lower income groups.      
  • The interest rate is 7 percent per annum
  • The loan amount is 80 to 85 percent of the market value of gold jewels offered as security or scale of finance/cost for approved DLTC / NABARD – whichever is lower is amongst the three.
  • The processing fee for a loan of Rs. 25,000 to Rs 5 Lakhs is 0.30 percent of the loan amount. The minimum amount is Rs. 300. For a loan of Rs 5 lakh to Rs 1 crore, it is 0.28 percent of the loan amount and the minimum amount is Rs. 1500
  • The repayment period is 6 months for Bumper Agri Jewel Loan and 12 months for other Agri jewel loan products.

6) Union Bank

  • Union Bank of India offers affordable interest rates on gold loans.
  • The interest rates are in the range of 9.40% to 10.15% per annum.
  • The final loan amount will be based on the value of gold and your overall credit profile.

Conclusion

Before you take a gold loan, you should know all the above details and choose the one which is the best for you. You should research and compare bank offers for various loan amounts. In some periods, banks run special schemes, so you must check the interest rates offered by banks regularly. Get instant gold loans in India by applying for a gold loan at CreditMantri. Enjoy the benefits of best gold loan offers, low interest rates, and quick gold loan disbursal.

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