Gold loans are one of the favorite financial solutions for the middle class in India, during periods of economic hardship. As these loans are secured by pledged gold, they typically offer lower interest rates compared to unsecured loans. With various banks and Non-Banking Financial Companies (NBFCs) providing gold loans, selecting the best offer can be daunting. Borrowers are encouraged to compare interest rates as well as additional fees that may apply, including processing fees, late payment charges, and possible prepayment penalties.
According to Bankbazaar data interest rates for gold loans start from 9 per cent and can go up to 26 per cent per annum, depending on the type of lending institutions with loan amounts extending from Rs. 1,500 to Rs. 1.5 crore. The repayment tenure is flexible, starting from just three months to four years.
Gold Loan Rates
According to the Bankbazaar website, Kotak Mahindra Bank provides the cheapest gold loans with interest rates ranging from 9 per cent to 24 per cent per annum and provides loan amounts between Rs 20,000 and Rs 1.5 crore. Similarly, Punjab National Bank (PNB) offers an interest rate of 9.15 per cent per annum. Loan amounts range from Rs 25,000 to Rs 25 lakh.
The Bank of Baroda provides competitive rate of 9.15 per cent per annum and provides loan amounts of up to Rs 50 lakh.
Canara Bank's gold loans start at an interest rate of 9.25 per cent per annum (linked to the MCLR), and the Bank of Maharashtra offers loans at an interest rate starting from 9.30 per cent per annum.
Then there are non-banking financial companies (NBFCs) that offer greater flexibility and higher maximum loan amounts, but they come with higher interest rates. For instance, Muthoot Financial Services provides gold loans at an interest rate of 10.90 per cent per annum and Manappuram Finance's rates range from 21 per cent to 26 per cent per annum.
Compare the interest rates, repayment periods, terms and conditions, and loan amount offered by different banks before selecting the best option.
Processing fees can range between 0 per cent and 2 per cent of the loan amount, plus GST. If you opt for a bullet repayment (one-time repayment of loan), a higher margin is applicable, which means lower the percentage of the gold you pledged that can be financed as a loan.
