Availing gold loans have been age old custom in the Indian system. Many people go for gold loan to meet short term requirement. However, they are one of the most expensive forms of loans and should be availed only in case of an emergency.
Gold loans are based on the value of the ornaments. During the loan tenure you are expected to pay the interest. Take a look at how the interest rates compare between different institutions.
The Muthoot Gold loan portfolio is the largest in India. Kerala based NBFC offer different types of schemes with duration ranging from one month more than 12 month or 36 months. Interest rate varies from 14% to 26% depending on the tenure and scheme. If the tenure is between 12-36 months than it is 11% flat.
Kerala-based NBFC's GL-A+ (A Plus) for a shorter loan tenure of upto 3 months offers loan against gold @ 18% per annum while for a tenure anywhere over 90 days upto 1 year, the institution charges an interest rate equivalent to 21% per annum. The NBFC Charges overdue interets at 3% p. a after one year.
Axis Bank offers gold loan @ 14.5%-15.5%. On overdue amount, the bank charges a penalty of 2%. However for foreclosure of the loan account or part payment, bank imposes no penalty amount.
Punjab National Bank
Depending on the purpose for which loan is being borrowed; for agricultural, allied-agricultural and other non-productive purposes, bank charges differential interest rate. With no limit for loan extended for agricultural and allied purposes, the bank provide liquidity against gold @ base rate + 1.5%. For loans extended for productive purposes other than agriculture bank charges interest rate @ base rate + 2.5%. While for non-productive purposes, it charges base rate + 2.5%.
Quantum of loan should be determined based on the net weight of the jewel/ornament and rate per gram fixed from time to time or 70 % of market value of the jewels to be pledged whichever is lower. The interest range from 11.75% to 13.75%.
Charges on gold loan
Gold Loan companies do charge for the complete process, which includes loan processing, valuation charges, late payment, pre-payment. These charges vary with different banks.