Comparison of gold loan products between Banks and NBFCs

Besides being a statement of fashion, gold jewellery also happens to be a good investment. That’s one of the reasons why most people don’t feel guilty about spending their earnings on gold. Many of us do own gold jewellery, most of which lies idle at home or is kept safely in a bank vault. Gold also happens to be one of the quickest ways by which you can avail loans from a bank or NBFCs.

Gold loans are loans granted to a person against gold jewellery deposited with the banks and private financial companies. Considering the loan is secured it is a great option for people seeking short-term loans.

Interest Rate And Processing Fee For Different Banks And NBFCs

Banks / NBFCs
Interest RateProcessing Fee
HDFC Bank11.50% – 15.00%0.50% – 2% of the amount taken as loan
ICICI Bank10.00% onwards1% of the loan amount taken
SBI10.55%0.50% of the amount taken as loan
Axis Bank15%-17.5%1% of the amount taken as loan
Muthoot Finance12%-26%0.25%-1%
Mini MuthootThe Board of the Company decides on the rate of interest for gold loans considering the market conditions and various external and internal factors.
Manappuram Gold Loan12-28% Charges depend on a number of factors including charges for advertisement, postage, stamp duty, statement of accounts etc.

Comparison Of Gold Loans Between Banks And NBFCs – 4 Things To Know

  1. Value of the gold – Both the NBFCs and banks decide on the value of the gold after deducting the impurities and making charges. The value deducted usually comes around 25-30 percentage of the gross value of the gold jewelry. The process of valuation may vary depending on the bank and NBFCs. Make sure you approach 3 or 4 different lenders or banks before choosing a bank or NBFC for a gold loan.
  2. Loan to value ratio – The maximum LTV or Loan to Value ratio allowed by the RBI for banks and NBFCs are 75%. This means you could get a maximum value of gold loan from banks. For higher LTV loans, usually, the interest rates are high.
  3. NBFC or Banks – If you are looking for immediate money an NBFC would be a better choice as they disperse the loan instantly. It could take around 3-5 days before you get a loan from a bank. Loans get credited to the bank accounts while taking gold loans from banks whereas NBFCs could give you cash if the value of a loan is low.
  4. Interest rates – The maximum rate of interest charged by a bank could be around 17%-18% whereas the interest rates could go up to 28% when it comes to NBFCs. Comparing the interest rates a bank would be a better option to apply for gold loans.

The Process Of Sanctioning Gold Loans

You could approach any reputable banks or a non-banking financial company that offers gold loans. The financial lender or the bank carry out a valuation of the gold jewelry by checking for its weight, purity and reduces the weight of stones that are inlaid if there is any.

Along with the loan application, you might have to submit certain documents. You should check with the bank or NBFC regarding this. In the case of banks, typically the documents include Aadhaar, PAN and any local address proof.

The loan amount gets sanctioned on successful completion of the verification of both the gold and the documents. Some lenders and banks could ask you for the proof of ownership of the jewellery in certain cases. Compared to the other types of loans available the interest rates on loans happen to be lower.

Depending on the interest rates on gold loans and the processing charges you can choose a bank or financial company that best suits your interest.  

This blog is maintained by the Finaura team. Finaura is a solution that will help you find the best gold loan solution from gold loan company nearest to you. If you have any queries please feel free to contact us. Call us on +91 484 2388285 or email us at [email protected]

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