In India, it is simple to get a gold loan; anyone possessing extra gold jewellery can put it up as collateral to get money. An easy option to get money without having to liquidate your long-term investments is through a gold loan. Once the paperwork and KYC have been validated, many institutions issue gold loans immediately.
South Indian Bank offers the lowest interest rate starting from 7 percent and maximum of up to 21 percent. Bank of Maharashtra offers gold loan at 7.20 percent. Followed by Indian Bank which offers interest rate at 7.35 percent. Punjab National bank offers rate between 7.40percent to 7.65 percent. State Bank of India offers gold loan at 7.50 percent. (Interest rates as on June 23, 2022)
From lender to lender, the gold loan’s term will differ. For instance, the HDFC Bank provides gold loans with terms ranging from three to 24 months. An SBI gold loan can be repaid in full in 36 months. Different types of gold loan packages with various terms are available from Muthoot Finance.
Many banks levy various charges for availaing gold loan. Say for example HDFC Bank charges include loan processing charges, valuation fee, renewal processing fees, Prepayment charges, Cheque / Ecs / SI / Swaping charges, CIBIL report copy charges and few more.According to The Kotak Mahindra Bank website, “A processing fee is charged on every loan, which is generally between 0% to maximum 2% (plus GST) of the total loan eligibility. The limit of your loans is directly proportional to the value of gold assets you provide. However, Minimum Loan amount: Rs. 20,000/- & Maximum Loan Amount: Rs. 1,50,00,000/- can be availed by a single customer/Family/Group at any point of time at the discretion of the Bank. The LTV – loan to value – ranges from 65% to 75%.”
A resident of India between the ages of 21 and 60 who is a businessperson, trader, farmer, or self employed or salaried individuals can apply for a gold loan.
When a Gold Loan is not repaid, the bank starts by reminding the borrower through email and text message to make the EMI payment. Certain penalties or interest rates are applied to the amount of the Gold Loan after a predetermined time period.As per HDFC Bank website, “Eventually, if the Gold Loan amount is not paid after repetitive follow-ups over the due course stipulated by the bank, the bank will proceed to sell or auction the gold ornaments and repay the loan amount.”
Banks may levy late payment charges if the payment is delayed due to any reason. ICICI Bank states in its FAQ, “You will be charged a penal interest (as the case may be) at the rate of 6% per annum, over and above the normal rate of interest.”
As per the Union Bank of India, “The approved gold jewel appraiser of the bank will verify the purity of the gold and also ascertain the exact weight, and then the gold will be valued accordingly.”
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