Features of Gold Loans and Interest Rates

 In our country, gold has a lot of cultural significance. India is the largest consumer of gold anywhere in the world. Even in the financial sector, gold is viewed as quite an asset. If you decide to loan i.e. borrow money from a financial institution to deal with a financial situation, gold loans can be a fruitful solution. Gold loans are loans taken against gold. This is a secured type of borrowing. Items such as jewelry, gold biscuits, and ornaments can be used as collateral for a gold loan. Interest rates can differ from 7% to the way up to 10% and more sometimes. These loans can be borrowed from banks or NBFCs. Lets us look at some features of gold loans and interest rates:

Where

Interest rates on gold loans can be easily calculated from anywhere in the country. In earlier times everyone had a traditional approach to opting for loans. Going to only banks was the more popular approach previously. However, now other than banks, individuals also opt for NBFCs when it comes to procuring loans on their collateral gold items. NBFCs or Non-Banking Financial Companies are by definition, companies that engaged in the business of investment, loans, acquisition of stocks/shares issued by the government or local authorities. For an NBFC to be able to lend a gold loan’s interest rate, it needs to be registered under the Companies Act, 1956.

Amount loaned

The amount the borrower receives for the interest rate on gold loans can differ from situation to situation. The loan amount will differ from one lender to the other as there is no standard gold loan interest rate for all lenders. A bank may offer gold loans between Rs 10,000 to 1 crore whereas an NBFC might offer a minimum amount of 1,500 with no maximum amount limit. Also, the amount loaned often depends on the purity of the gold being used as collateral. Gold loans can only be procured on items with purity between 18K to 22K.

Tenure

The time period of the borrowing repayment of the gold loan interest rate may vary from one lender to the other. There is no fixed/predicated tenure period. This often depends on the collateral items, bank policies, or simply on the borrower’s requirements. For example, a bank may offer a tenure period between 3 months to 24 months. Some banks also offer maximum tenure of up to 36 months.

 

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