A gold loan is provided to address immediate financial needs by pledging gold, including ornaments, jewelry, or coins, as collateral with the bank or lender. Interest is levied on the borrowed sum, and upon complete repayment of the loan, the pledged gold items are returned securely. Generally, lenders offer gold loans with interest rates beginning at 8.75% per annum.
Gold Loan Interest Rates
| Lenders | Interest Rate |
|---|---|
| State Bank of India | 8.75% p.a. onwards |
| Axis Bank | 17% - 19% p.a. |
| Punjab National Bank | 9.25% p.a. onwards |
| Bank of India | 8.80% p.a. onwards |
| Canara Bank | 9.25% p.a. |
| ICICI Bank | 10% p.a. |
| Bajaj Finserv | 9.50% – 28% p.a. |
| India Gold | 0.77% per month |
| IIFL Finance | 11.88% - 27% p.a. |
| Rupeek | 8.88% p.a. onwards |
Factors that Affect Gold Loan Interest Rate
Factors influencing the interest rate on gold loans include:
Loan Amount: The interest rate applied by the bank correlates with the loan amount. Consequently, higher loan amounts may incur higher interest rates.
Price of gold in the market: When the price of gold is high, the value of your pledged gold ornaments or coins also increases. In such situations, lenders may offer you a lower interest rate because the risk involved is lower. If you're unable to make your monthly payments, the lender can recover the outstanding amount by selling or auctioning the gold ornaments without much difficulty.
Inflation: When inflation rates are high, the value of currency decreases, leading individuals to seek more gold as a safeguard. Gold serves as a hedge against prolonged inflationary periods, causing gold prices to rise. During such times, lenders may offer lower interest rates for gold loans, as gold's value acts as security against inflation.
Relationship with the bank: Many lenders extend gold loans primarily to their existing customers, although individuals without prior banking history may also be eligible in certain cases. However, existing customers generally have an advantage in negotiating for lower interest rates with banks or lending institutions.
Gold Loan – Eligibility & Documentation
To avail a gold loan, applicants need to have their personally owned gold, gold ornaments, or coins evaluated by an appraiser designated by the bank. Additionally, they must be at least 18 years old, possess a stable income, and not exceed 65 years of age.
Documents Required
Banks typically request the following documents for a gold loan application. Any additional requirements will be communicated by the bank during the application process:
- Completely filled Application Form along with 2 passport-sized photographs
- KYC Documents of the applicant, which may include:
- Passport
- Voter’s ID card
- Aadhar card
- Driving License
- PAN card
- Utility Bills (Water & Electricity)
- Bank statement for the last 12 months
- Any other documents specified by the lender
Gold Loan Repayment Methods
There are several methods available for repaying your gold loan amount:
- Regular EMI – The total amount due, comprising both interest and principal, will be divided equally and payable every month throughout the entire duration of the loan.
- Partial Payments – Under this method, you have the flexibility to make payments towards the due amount as and when you prefer. However, it's essential to ensure that the full amount is paid off before the due date.
- Bullet Repayment – Under this method, you must repay the entire amount, including both the principal and interest, as a lump sum at the end of the loan tenure.
- Pay Interest as EMI & Principal Later – Here, you have the option to repay the interest amount each month as an Equated Monthly Installment (EMI). However, the principal amount borrowed must be repaid in full at the end of the loan tenure.
