A MAJORITY of Indians for whom gold was auspicious and an important tool of financial security are increasingly shedding their emotional attachment to selling gold to raise loans. What could be a bigger evidence of this than the spate of television advertisements by NBFCs promising gold loans in five minutes or offering loans for up to 90 per cent of the value of gold?
With banks offering very attractive interest rates for gold loans and the processing time also being much quicker compared to other loans, gold loans are getting popular among not just farmers and traders but also the salaried class employees.
How much loan will you get for your gold?
It depends on the quantum of gold pledged. Banks offer 60-70 per cent of the value of the gold pledged as loan amount while NBFC offer as high as 80-90 per cent of the value as loan.
The absolute amount of loan could range anywhere between Rs 25,000 to about Rs 10,00,000; while players like Muthoot Finance promise gold loans of up to Rs 1,00,00,000.
Who can take a gold loan?
Gold loans are largely taken by traders and small time businessmen who would often need quick money for their business cycle. Increasingly many salaried employees are also taking gold loans to meet with their emergency needs like funds to finish a house under construction or meet a funding gap after having taken a home loan.
Also for people who will not get a personal loan otherwise, like those with a bad credit record, gold loans would be a good option. For banks and NBFCs too it is safe as it is a secured loan.
Should you go to banks or NBFCs?
Banks offer gold loans with a structured repayment option of 12-24 months like other loans. But many NBFCs offer gold loans where the interest rate is payable on the number of days the loan has been outstanding.
Traders and businessmen looking for a quick roll over of funds can take a gold loans for say Rs 1,00,000, repay it in 5-6 days, pay an interest rate of only 3 per cent and take back the gold.
Also while banks offer gold loans at much lower rates compared to NBFCs the time taken for processing of the loans is longer.
Many NBFCs on the other hand promise gold loans in as fast at 3-5 minutes.
What charges should you look out for? While rates like the 1 per cent monthly interest rate offered by NBFCs may look attractive, gold loans also come with many supplementary charges like handling/processing fee of 0.25-0.50 per cent, gold assessing charges of 0.50-1 per cent and custodial charges for gold. It is important to know what the all-included charges would work out too, before zeroing in on a lender.
