A gold loan is a sort of secured loan that allows you to borrow money against gold jewellery and coins. A lender can only lend you up to 75% of the value of your gold, according to Reserve Bank of India (RBI) standards. Because gold prices fluctuate daily, most lenders will calculate the worth of your gold based on the market rate on the day you request for the loan.
The interest rates for gold loans normally start at 7% and rise to 18%. The quantity of the loan and the borrower's income are the two most important criteria in determining the interest rate.
The interest rate you must pay will be higher the larger the loan amount. A consistent and high income can assist you in obtaining a reduced interest rate
. The value of your loan is proportional to the weight of your gold jewellery. "If the gold ornaments are set with valuable stones, the weight of the additional pieces will be deducted from the total value of the gold promised during the valuation process." "Raj Khosla, the founder and CEO of MyMoneyMantra.com, said.
The purity of the gold has little effect on the rate of interest. "There is no direct relationship between gold purity and interest rates." The appropriate rate of interest may be marginally impacted in some situations, such as when the pledged gold is 18k in purity "Khosla stated. Interest rates are unaffected by credit scores. For starters, gold loans do not require a credit score from the borrower. Because the lender retains at least 25% of the loan's value as collateral, they are prepared to lend even if the borrower has a bad credit score.
If you pay back the loan
well before pre-determined payback window, which is normally 3-6 months, certain NBFCs and banks levy a foreclosure fee of up to 2% (excluding GST), as well as a processing fee of at least $500 or 0.5 percent -2 percent of the loan amount. "Banks and NBFCs levy foreclosure fees, but practically all new-age digital lenders charge only an interest rate," Khosla explained.Personal or gold loans: which is better?
Interest rates on gold loans are lower than on personal loans because they are secured. They also provide more repayment options. "Gold loans offer a variety of repayment alternatives, including normal EMIs, the bullet repayment method, staggered interest payments with the principal paid at the end of the term, and upfront interest payments with the principal paid at the end of the term." Personal loans do not provide as many possibilities. In addition, the normal loan tenure for gold loans is 1-2 years," Shetty explained.Also Read : Nykaa reveals collaborations with three homegrown brands.