Why banks are promoting gold loan?

Now, financial firms and banks are using that demand to lure more customers from pawnbrokers and money lenders. The added competition could lower borrowing costs for consumers, who in desperate moments of financial stress often pay exorbitant rates to informal lenders to use gold as collateral.

What is gold loan interest rate?

The interest rates on gold loan, availed by pledging gold, are relatively lower than other types of loans and range between 7.35\% to 29\% p.a. Banks and other financial institutions in India offer gold loans, the loan amount for which ranges from Rs. 1500 to Rs. 1.5 crore.

What is the rule of gold loan?

The loan amount is decided on the basis of the LTV (Loan to Value) ratio. This ratio varies from lender to lender and goes up to a maximum of 80\% of the value of the pledged gold. This means that if the market value of your gold is Rs. 5 lakhs, you can get a maximum of Rs.

Can I get a gold loan by selling my gold?

Not by selling your gold, but by pledging it to a lending institution. There are various banks and NBFCs across India that offer gold loan to their customers at attractive interest rates. But before applying for a gold loan, you should be aware of its procedure, merits, and demerits, which is further discussed in the post.

What should you avoid when getting a gold loan?

Here are a few mistakes that people must avoid when getting a loan against gold: Not checking creditor’s credibility: A gold loan is a secured loan, which implies that it is protected by collateral (gold in this case). This collateral remains with the creditor or lender till the loan amount is completely paid off.

What are the advantages of a gold loan?

Faster processing – Gold loans are secured loans and thus includes lenient eligibility criteria and minimal documentation. It does not even require credit score for loan approvals. And therefore, lenders generally disburse the loan in just a few hours.

How long does it take for a gold loan to disburse?

And therefore, lenders generally disburse the loan in just a few hours. People who are eligible for an online gold loan can even get the loan amount in just a few minutes. Lower interest rate – As compared to unsecured loan such as personal loan, gold loans, which is a secured loan, charge a lower rate of interest.