To take care of a financial emergency, an individual has various options. These include taking a personal loan or redeeming their investments in financial instruments like the provident fund, mutual funds etc.
When it comes to borrowing from a financial institution, other than availing a personal loan, one can also opt for a gold loan. If you are planning on taking a gold loan (or a loan against gold), here is what you need to know.
What is a gold loan?
A gold loan is a loan against gold. It is a secured loan where gold articles such as gold jewellery, ornaments etc. are taken as collateral by the lending bank/NBFC. The loan is given to the borrower against this gold as collateral.
Where to avail gold loan?
Apart from banks such as SBI, ICICI Bank, HDFC Bank etc., non-banking finance companies (NBFCs) also offer gold loans to individuals. NBFCs which offer gold loans include Muthoot Finance, Manappuram Finance etc.
Minimum and maximum gold loan amount
The amount of loan that an individual can get against a gold article will vary from lender to lender. For instance, ICICI Bank offers gold loans between Rs 10,000 and Rs 1 crore. Whereas the State Bank of India (SBI) offers gold loans between Rs 20,000 and Rs 20 lakh. While, Muthoot Finance offers gold loans starting from a minimum amount of Rs 1,500 with no maximum limit.
Tenure of gold loan
The tenure of the gold loan will also vary from lender to lender. For instance, HDFC Bank offers gold loans with tenures between three months and 24 months. Maximum period of repayment of an SBI gold loan is 36 months. Muthoot Finance offers different types of gold loan schemes that come with different tenures.
Interest rate on gold loan charged by bank and NBFC
|Bank / NBFC||Gold Loan Interest Rate||Processing Fee|
|SBI||7.00% to 7.50%||0.50% + GST|
|Canara Bank||1 Year MCLR (7.65%)||–|
|Bank of Maharashtra||8.00%||As applicable|
|Indian Bank||8.5% to 8.75%||–|
|Lakshmi Vilas Bank||8.80%||–|
|South Indian Bank||8.85% to 9.35%||–|
|Punjab National Bank||8.60% to 9.15%||0.75% of loan amount|
|Central Bank of India||7.15% to 9.20%||NIL|
|Punjab & Sind Bank||8.10% to 9.35%||–|
|J & K Bank||10% With monthly rests (Fixed)||–|
|Karur Vysya Bank||10.85%||–|
|Indusind Bank||10.5% to 16%||Processing Fee – 1%|
|AU Small Finance Bank||Up to 18%||1% of loan amount|
|Kotak Mahindra Bank||10.5% to 17%||Upto 2%|
|Axis Bank||9.75% to 17.50%||1% + GST|
|HDFC Bank||9.90% to 17.90%||1.50% + GST|
|Bandhan Bank||10.99% to 18.00%||1% + GST|
|ICICI Bank||10% to 19.76%||1% of loan amount|
|Muthoot Finance||12% to 27%||–|
|Manappuram Finance||Max 29%||–|
|United Bank||1 Year MCLR (9.35%)||–|
|City Union Bank||1 Year MCLR (14.25%)||–|
|Dhanlaxmi Bank||starting 9.65% (Fixed)||–|
|Federal Bank||8.50% onwards||–|
|Union Bank||MCLR+1.65% to MCLR+ 2.40%||–|
|Bank of Baroda||BRLLR +SP+1.75 %||0.50% + GST|
|Bank of India||Decided from time to time.||–|
|Karnataka Bank||As per MCLR guidelines.||–|
All data sourced from Economic Times Intelligence Group (ETIG)
Interest rate on gold loan sorted based on increasing order of maximum interest rate charged by bank/NBFC
Data as on August 6, 2020
What are the documents required?
To avail a gold loan, the bank or NBFC will ask you to provide various documents. Documents normally required include your proof of identity such as PAN, Aadhaar etc. and proof of address like Aadhaar, passport, Voter-ID card etc, and your photograph. Any additional documents required would vary from lender to lender.
What are the charges?
For loans like home, auto and personal loans, the borrower is usually required to pay processing charges/fees to avail the loan. While taking a gold loan, apart from processing fees, an applicant may be asked to pay for valuation of gold which will be used as collateral by the lending institution. For instance, HDFC Bank charges Rs 250 as valuation fees for loan up to Rs 1.5 lakh and Rs 500 for loan over Rs 1.5 lakh.
Apart from processing fees and valuation charges, a bank can also charge documentation and foreclosure charges.
Therefore, you should check with the bank and/or NBFC for all the charges that will be levied before availing the loan.
(The information related to charges and various other modalities has been collected from websites of banks and NBFC on August 5, 2020. The interest rates charged for gold loans by various banks/NBFCs will be updated once every week in the article.)
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