When you’re in urgent need of cash, a gold loan can be one of the quickest and simplest ways to arrange money. By pledging your gold ornaments as collateral, you can get a loan with minimal paperwork and quick disbursal. Here’s a fresh look at gold loans, highlighting essential aspects and which banks are offering the best rates.
What Is a Gold Loan?
A gold loan allows you to borrow money against your gold jewellery. You can pledge 18 to 22-carat gold, and the bank provides a loan based on the value of that gold. It’s considered a secured loan because your jewellery acts as collateral. Since it’s backed by gold, banks usually offer these loans at a lower interest rate compared to personal loans or credit cards. Another advantage is the minimal paperwork and fast processing time, making gold loans an ideal choice in emergencies.
Key Features of Gold Loans
- Loan against gold jewellery: You can get a loan by pledging your gold jewellery.
- Quick disbursal: Loans are processed swiftly with minimal documentation.
- Flexible repayment: Different banks offer flexible repayment options, including bullet repayment, EMIs, and overdraft (OD) facilities.
- Low interest rates: Compared to unsecured loans, gold loans typically offer lower interest rates, making them a cost-effective borrowing option.
Interest Rates on Gold Loans
One of the biggest advantages of gold loans is the relatively low interest rate. Depending on the bank, interest rates can vary significantly. Here’s a detailed table outlining the interest rates, processing fees, and loan tenures offered by various banks:
| Bank Name | Interest Rate (Annual) | Processing Fees | Tenure |
| State Bank of India | 9.05%-10.20% | Up to 0.50% of loan amount | EMI: 3 years; Bullet repayment: 3, 6, 12 months |
| Indian Bank | 8.80%-10.60% | NIL | Bullet: Up to 1 year; EMI: Up to 35 months |
| Canara Bank | 9.00% | Waived off till 30th Sept 2024 | Bullet: Up to 6 months; OD: Up to 2 years |
| Muthoot Finance | 10.50% onwards | Rs 25-75 (appraisal charges) | Up to 1 year |
| Manappuram Finance | 9.90% onwards | Rs 10; Additional fee on re-pledge: 0.007% | Up to 1 year |
| Punjab National Bank | 9.25% | 0.30% of loan or Rs 500 (whichever higher) | EMI: Up to 3 years; Bullet: Up to 1 year; OD: 1 year |
| ICICI Bank | 9% onwards | Up to 2% of loan amount | 6 months to 1 year |
| Axis Bank | 17%-19% | Up to 0.5% of loan amount | 6 months to 3 years |
| South Indian Bank | 14.80%-15.05% | Up to 1% of loan amount | Bullet: 3, 6, 12 months; EMI & OD: 1-3 years |
| CSB Bank | 9.49% onwards | 0.25%-0.50% of loan (appraisal Rs 100-750) | Term loan: 5-42 months; OD: Up to 1 year |
| DCB Bank | 9.55%-18% | 2% of loan amount | 1 to 5 years |
Note: The data was compiled by Paisa Bazaar and is accurate as of August 2024. Interest rates and terms may vary slightly depending on market conditions and bank policies.
Gold Loan: A Cost-Effective Way to Borrow
When compared to other types of loans, such as personal loans or credit card cash advances, gold loans tend to offer lower interest rates. Currently, interest rates for gold loans range from 8.80% to 19%, depending on the bank and loan tenure. For example, Indian Bank offers one of the lowest interest rates starting at 8.80%, while Axis Bank’s rates can go as high as 19%.
Who Can Apply for a Gold Loan?
Any Indian citizen between 18 and 75 years of age can apply for a gold loan. Banks usually accept gold ornaments in the form of jewellery, but they do not issue loans against 24-carat gold or gold coins. To apply, you’ll need to submit your jewellery to the bank, and they will appraise the value based on its weight and purity. Once the appraisal is complete, the bank will disburse a loan amount after deducting a small margin (also known as a “haircut”).
SBI’s Gold Loan Scheme
The State Bank of India (SBI) has its gold loan scheme, offering loans based on the purity of 18 to 22-carat gold jewellery. The loan amount is capped at Rs 50 lakh, and you can apply for a gold loan up to three times. However, 24-carat gold and gold biscuits are not accepted under SBI’s scheme. The bank’s terms may differ from other banks, so it’s always best to check their latest policies before applying.
Things to Keep in Mind
- Collateral requirement: The gold you pledge will be held by the bank until the loan is repaid.
- Loan-to-value (LTV) ratio: Banks may provide up to 75% of the market value of your gold as a loan.
- Repayment flexibility: Some banks offer flexible repayment options, including bullet repayment (paying off the entire loan at once) or equated monthly instalments (EMIs).
- Tenure: The loan tenure can vary from a few months to several years, giving you enough time to repay based on your financial situation.
Conclusion
Gold loans are a quick and affordable way to get funds in an emergency, offering lower interest rates and easier processing compared to unsecured loans. With various banks providing competitive options, you can choose the one that fits your needs best. Be sure to compare the interest rates, fees, and repayment terms before making your decision.
