With the latest policy rate hike by the Reserve Bank of India, interest rates across loan categories have started shooting upwards. What's more, the central bank has hinted that in the backdrop of stubborn inflation, the possibility of yet another rate hike cannot be ruled out.
For the borrowers, this means that the already-expensive loans could get costlier in the coming days. However, those who cannot postpone their borrowing requirements till the interest rate cycle takes a turn for the better can consider alternative avenues to fulfil their funding needs. Loan against gold jewellery, for instance.
One of the most commonly owned asset in the country, gold jewellery can come in handy during times like these.
Increasingly, Indian borrowers are willing to let go of the resistance to pledging their gold jewellery. Add to this the soaring prices of gold, which has pushed up the eligible loan amount, and you get an extremely handy, liquid and reasonably-priced source of borrowing.
It is one of the cheapest borrowing avenues available today. Banks and NBFCs make advances against gold ornaments at a rate of 12% to 15%.
In contrast, personal loans could carry an interest rate as high as 25% in some cases, depending on your profile and the loan amount required.
The process of disbursal is comparatively quick and smooth, with lenders promising approval in five minutes to an hour. The processing fee, too, is low at 0% to 0.5%.
Also, the borrowers are not required to specify the purpose of borrowing. However, the loan will not be sanctioned if it is being taken to fund speculative activities.
Banks like HDFC offer loans of up to . 10 lakh while non-banking financial companies (NBFCs) like Mannapuram Finance and Muthoot Finance extend even up to . 1 crore.
The prospective borrower has to furnish proofs of identity (passport copy/voters ID card/driving licence), address (ration card/telephone or electricity bill) and signature (passport copy/banker's verification/cheque, etc).
As these loans are generally meant for short-term needs, the repayment tenure is typically between six and 12 months.
