There are times when we are in requirement of some emergency funds as we may find it difficult to arrange for money in a quick span of time. For crisis like these, many leading banks and Non-Banking Finance Companies have started offering gold loans. There are several advantages of opting for gold loans. These loans come with quick disbursals and eye-catching interest rates. With the availability of gold loan, you can easily fulfill your financial requirements without any hassle.
What is gold loan: In other words, when you apply for gold loan, the bank will take your gold ornaments as a collateral for the tenure of the loan. Banks usually charge a rate of interest and as soon as you repay the whole loan, the bank will give you back your jewellery items. It is important to know the type of gold accepted for availing gold loan. You need to check the following details before applying for gold loan:
1. Types of gold that banks accept
Most of the banks only accept gold jewellery and the purity of the gold must remain between 18k to 22k. It is important to note that lenders do not accept gold bullion or gold bars in the form of collateral.
2. Maximum Loan Value
A large number of banks offer gold loans for a maximum loan to value ratio (LTV) of 75% of the existing market prices of the yellow metal. The reason for high LTV ratio is fixed to enhance the borrowing capacity of citizens to meet their financial emergencies. According to RBI official website, under the extant guidelines, loans sanctioned by banks against pledge of gold jewellery or ornaments must not go beyond 75% of the value of gold jewellery or ornaments. For instance if you decide to mortgage gold worth Rs 100,000, the maximum loan amount that you may get is Rs 75,000.
3. Gold evaluation and loan sanction
It is important to determine how gold loan works. You should be aware of the evaluation and sanction procedure. The bank will carry out the evaluation of gold given as collateral after which it decided the maximum loan amount that you may receive and the interest rate levied on it. You have the right as a borrower to choose the loan repayment period which may range from 6 months to 24 months.
4. Best rates offered by leading banks in India
It is important to find the best rate being offered by various leading banks in India. Below are the gold loan interest rate along with the processing fee of leading lenders.
Bank of Maharashtra: It offers an interest rate of 7 % and the processing fees will be Rs 500 to Rs 2000 including GST.
Canara Bank: The bank is currently offering an interest rate of 7.35% and the processing fees is Rs 500 to Rs 5000.
Union Bank: The leading bank offers you an interest rate of 7.25% to 8.25%. There is no information available when it comes to its processing fees.
Punjab & Sind Bank: The bank offers an interest rate ranging from 7% to 7.50% with processing fees starting from Rs 500 to maximum of Rs 10,000.
PNB: It offers an interest rate of 7% to 7.50% on gold loans.
SBI Bank: It offers an interest rate of 7.30% p.a. with loan amount up to Rs 50 lakh for a tenure of 3 years. The processing fee is 0.50% of the loan amount along with GST subject to a minimum of Rs 500.