What is Gold Loan?
Whenever there is a cash crunch and you have various requirements and commitments, you can choose some ways to resolve the financial crisis, and in that case, the loan becomes the best way. There are various types of loans i.e., secured loans or unsecured loans, where you can choose the loan types and amount as per your eligibility. While getting a personal loan, you can apply based on your credit score, and monthly income whether through salary or ITR. Apart from that, you can also get a secured loan i.e., a loan against property., and the most famous loan in this section is a gold loan. So, let’s discuss what is a gold loan, how to apply for it, and what are the beneficial features of a gold loan.
What is the difference between Personal loans and gold loans?
The core difference between a personal loan and a gold loan depends on its nature as, a personal loan is approved based on income, credit score, types of employment and other factors without having the requirement of collateral, it comes under the category of unsecured loan.
Whereas, when a loan is approved based on the collateral where the loan amount is approved based on your asset’s value, especially, on the value of a gold loan.
Therefore, there are differences in the application and approval process. So, let’s discuss the difference between personal loans and Gold loans separately.
Personal loan
The personal loan is approved by checking the income and credit score of customers where it is free from collateral. You don’t have to keep any collateral while borrowing. You can get a personal loan with a simple application process. While applying for a personal loan, you can go through the lender’s website and submit your form by entering all the required details, especially with your documents like Aadhar, PAN, Salary Slip, ITR, etc., The personal loan can be available with different features such as
- Instant Approval due to less formalities.
- Competitive interest rate with affordable prices.
- No collateral is required for the personal loan.
- No restrictions on the usage of the loan amount.
What is Gold Loan and its Features
The gold loan comes in the category of secured loans where the lender i.e., Banks or NBFCs provides this loan based on your required loan amount and it is decided as per the value of your Gold. The loan amount on the gold loan is decided as per the weight of the gold, i.e., it is calculated per gram. So, before getting the loan amount, you must be sure about the weight of gold so that you can be sure of how much you can borrow.
Features and Benefits of Gold Loan
The gold loan is beneficial, especially when you don’t have a higher credit score and the lender is refusing your loan application. At that time, the gold loan becomes, easy and helps you get the approval easily with some formalities. So the beneficial features of a gold loan are
- Easy and Instant Approval: The gold loan is approved instantly when you are fit with all the eligibility criteria. The approval process goes through a small verification, and once your assets are found relevant, you can get the approval.
- Competitive Interest: You can borrow a gold loan with competitive interest which will help you save an additional amount.
- Lower Processing Fees: The processing fees are nominal which will be beneficial for your financial assistance.
- Flexible Tenure: Flexible tenure can help you get the loan with EMI and another affordable plan which will help you have better options.
- Desired Loan Amount: You can borrow the loan as per the value of your assets which will help you have better options, especially in terms of loan amount.
Personal Loan Vs. Gold Loan
There are multiple factors on what the loan amount is approved and these are as follows.
| Factors | Personal Loan | Gold Loan |
|---|---|---|
| Collateral | The personal loan is free from collateral. | The gold works as collateral in the gold loan |
| Interest | The interest rate might be higher with a lower credit score. | The interest rate is slightly higher compared to a personal loan. |
| Approval time | Approval time is much less when you have complete documents with eligibility. | Your loan is approved even after having a lower credit score. |
| Income and credit score | The income and credit score is checked before approval. | The income is not analyzed because the loan is approved based on asset value. |
| Tenure | Tenure can be longer also when payment is done in EMI. | The tenure is often shorter but tenure is flexible. |
How to calculate the loan amount with a Gold Loan
The loan amount, for the loan against property, is based on multiple factors the loan amount is calculated based on the weight, quality or purity of gold, current market price and loan to value. Before approving your loan amount, it is calculated as.
Weight of Gold: The weight of gold is significant, especially while applying for a loan. It is calculated with the price at that time. So, the current market price always matters.
Purity of Gold: The gold, whether coins or ornaments must be pure, and as per the purity like identifying the hallmark and other details, lenders approve the loan amount.
Current Market Price of Gold: Whatever prices are going on at that time is treated as the value for the loan.
List of Banks and NBFC providing Gold loan
There are multiple nationalized Banks, Private Banks and Non-Banking Finance Companies (NBFC) That can help you get a gold loan, where you must check the eligibility criteria and other terms and conditions which will help you get the loan easily. The list of these lenders is as follows
What are the Interest rates applied to the Gold loan?
Public Sector Banks:
| Banks | Interest Rate | Tenure and others |
|---|---|---|
| State Bank of India (SBI) | 9.05% p.a. onwards | Up to 36 months |
| Bank of Baroda | 9.15% p.a. onwards | Up to 50 lakh |
| Punjab National Bank (PNB) | 9.15% p.a. | Up to 25 lakh |
| Canara Bank | 9.25% p.a. (MCLR) | 5,000 to 35 lakh |
| Indian Bank | 8.80% p.a. to 10.40% p.a. | Up to 35 lakh |
| Central Bank of India | 7% p.a. to 9.25% p.a. | 10,000 - 40 lakh |
| Bank of India | 9.15% p.a. onwards | Up to 36 months |
Private Sector Banks:
| Banks | Interest Rate | Tenure and others |
|---|---|---|
| HDFC Bank | 9.30% p.a. to 17.86% p.a. | 3 months to 24 months |
| ICICI Bank | 11.22% p.a. onwards | 12 months |
| Axis Bank | 17% p.a. onwards | 6 months to 36 months |
| Kotak Mahindra Bank | 9.00% p.a. to 24.00% p.a. | 20,000 - 1.5 Crore |
| IndusInd Bank | 10.35% - 17.05% | Up to 20 lakh |
| Federal Bank | Up to 25% p.a. | 1,000 - 1 Crore |
Non-Banking Financial Companies (NBFCs):
| NBFC | Interest Rate | Tenure and others |
|---|---|---|
| Muthoot Finance | 10.90% p.a. onwards | 1,500 with no maximum limit |
| Manappuram Finance | 21% p.a. to 26% p.a. | As per the requirement of the scheme |
| IIFL Finance | 11.88% p.a.- 27% p.a. | At the discretion of the bank |
| Cholamandalam Investment and Finance Company Limited (Cholamandalam Finance) | [Please note: Cholamandalam Finance may not offer gold loans] | [Please verify with Cholamandalam Finance directly] |
Disclaimer
The rate of interest can always vary based on the lender’s policies, their terms and conditions, and the eligibility of customers. The loan amount always varies on the value of assets such as purity of loan, current market value and others. Therefore, the interest rate of a gold loan varies on the terms and conditions and the given interest rate is just as for ideas and approximate values.
Conclusion
Getting gold becomes beneficial, especially when you have difficulty getting a personal loan, especially due to lower credit scores and income. The gold loan, which is provided by various banks and Non-Banking Finance Companies (NBFC) becomes easy and affordable because of lower interest rates and processing fees. If you are willing to apply for a gold loan you choose your lenders and can get the value for your gold as per the market rate. And finally, you will get the loan for your household needs.
FAQs About Gold Loan
Ans. It is beneficial for those whose monthly income is either less or not sufficient to get a personal loan. In that case. You can get a gold loan.
Ans. The interest rate for a gold loan might be slightly higher, especially when your credit score is lower. In that case, the lender approves the loan at higher interest. Whereas, you can negotiate when your credit score is high.
Ans. You can choose the lender from where you are planning to borrow. However, will depend on your eligibility.
- Go to the lender’s office.
- Get approval with the value of your assets.
- Get your approval for the loan.
Ans. The loan amount depends on your Gold weight and its current market value. However, you can get the ideas from the lender’s website.
Ans. The documents for a personal loan are Aadhar, PAN, address proof, and most probably the bills of the gold.
