Gold loans provide quick access to the borrowed funds with minimal paperwork. They are a good financial option for emergency cases or individuals with poor to no credit history. As a country where households possess the world’s largest gold reserves, India has a lot of gold loans providers. Here are some of the best gold loan options available on the local market.
It is estimated that Indian households own 24–25,000 tonnes of gold. At the same time, rising financial inclusion and financial literacy boosted public demand for alternative assets when it comes to savings and investments. Thus, many people in India might prefer exchanging their gold bullion or jewellery for fiat, stock or cryptocurrency. However, most would like to diversify their portfolio, mixing both traditional assets like gold and innovative financial instruments like crypto. One of the ways to leverage gold value without actually losing the asset is obtaining a gold loan.
What is a Gold Loan?
A gold loan is a secured loan where gold jewellery, coins, or bars serve as collateral. The loan amount typically depends on the gold value assessed by the lender based on current market rates.
Since these loans are secured by collateral, they usually come with lower interest rates compared to unsecured ones, e.g. personal loans. There are no limitations to the loan purpose so the borrower might use the money for any personal need.
Besides, since the loan is secured by a tangible asset that rarely loses its value, there are little requirements towards the borrower’s credit history or documentation. Gold loans are typically processed quickly, making them a convenient option for those in urgent need of money.
In India, there are a few types of gold loans available on the market like:
- gold loan against jewellery – a loan secured against your gold ornaments or coins as collateral;
- gold loan for farmers – a dedicated type of gold loan catering specifically to farmers’ financial needs. The funds might be used for crop-related expenses, buying agricultural equipment, seeds, fertilisers or other farming requirements. Besides, the repayment schedule may be synchronised with crop cycles and harvest seasons;
- gold overdraft – a credit line, granting you a pre-approved limit secured by gold collateral from which you can withdraw money as needed and only pay interest on the amount you use.
Benefits of Gold Loan Vs Selling Gold
On the one hand, selling gold also provides immediate cash to the gold owner without the obligation to repay it later. However, selling your gold means you no longer own the asset, which may appreciate in value over time. Therefore, some people might prefer to use the current gold value in the form of a loan and leave the asset itself for the future. Besides, gold ornaments and jewellery might hold sentimental value, so not every person is ready to give up on them even in dire need of quick money.
Selling the gold means you don’t have to worry about repaying a loan or paying interest. And yet, the amount you receive depends on current market prices, which can fluctuate. You may not get the best offer if the market is down. With a gold loan, you can use it as collateral for urgent needs and sell it later at fair market value on more favourable conditions.
As for the disadvantages, gold loans are usually short-term, so they might not be suitable for long-term financial needs. Besides, if you cannot repay the loan, the lender may sell the gold to recover the outstanding amount. Therefore, if you have no means to repay a loan, selling gold might be a better option.
Best Gold Loan Options
There are a lot of gold loans available in India, provided by reputable financial institutions. Choosing a reputable gold loan provider directly impacts the security of your assets, the fairness of the terms, and the overall experience. Here are some of the best loan options listed alphabetically.
Axis Gold Loan
Axis Bank offers gold loans from Rs 25,001 to Rs 40,00,000. The repayment tenures range from 6 to 36 months. The bank’s MCRL rate is 9.30% and the effective rate is 17%. The processing fees are up to 0.5% of loan amount. Borrowers have flexible repayment options, including interest payment upfront and repayment of principal on maturity date, monthly interest payment and repayment of principal on maturity date, and equated monthly instalments. For unique demands, Axis Bank also provides gold loans with same-day disbursals.
Bank of Baroda Retail Gold Loan
Bank of Baroda provides gold loans up to Rs. 50 lakhs per customer. At the same time, there are no processing charges up to Rs. 3 lakhs. The institution offers 12 month and 36 month EMI scheme options, with paying interest on a monthly basis. The principal will be repaid by way of bullet payment at any time during the tenure of the loan. The funds can be used for any personal purposes, other than speculation, like education, wedding, buying a vehicle, etc.
HDFC Gold Loan
HDFC Bank offers gold loans with little paperwork and fast approval (under 45 minutes). Processing fees are up to 1% of disbursal amount plus taxes, and interest rates begin at 9% annually. The HDFC Gold Loan has a minimum sum of Rs. 25,000 or Rs. 10,000 for rural markets. These gold loans are available for tenures starting from 6 months up to 48 months. The funds may be used for education, business expansion, personal requirement, medical crisis or any other specified end-use case. HDFC also offers a gold overdraft facility where you pay interest only for the amount utilised.
IIFL Finance Gold Loan
With IIFL, you can get a loan against your gold in just 5 minutes. Instant gold loans can be accessed online or at any of the 2700+ IIFL Gold Loan branches in 25 Indian states. The funds can be used for different financial needs, like medical emergencies, business expansion, or wedding expenses. Interest rates vary according to the loan amount and repayment frequency from 0.99% onward p.m. (11.88% – 27% p.a.). You can get a maximum loan up to 75% of the market value of your gold depending on the quality of the gold. The processing fee varies depending on the availed gold loan scheme starting from Rs 0 onwards, while the MTM charges are charged at flat Rs 500. IIFL Finance also provides special schemes for farmers where the interest rates are lower so that they can avail gold loans to cater their capital requirements.
Muthoot Finance
Muthoot Finance is an Indian financial corporation and the largest gold loan non-banking provider (NBFC) in the country. The institution has a vast network of 4,265 branches spread throughout 21 states and four union territories. Outside India, Muthoot Finance is established in the UK, the US, and the UAE. The firm’s gold loans start at Rs 1500 and have no maximum limit. There’s a variety of gold loans available here for different purposes and circumstances (e.g. small loans at low interest rates, special loan scheme for women, online gold loans, high value personal and business loans, and gold loan at home). Besides, Muthoot Finance offers flexible payment options like pre- and part payment facility, discounts by timely monthly payments, etc.
SBI Gold Loan
The largest public sector bank in India, SBI has two gold loan offerings. Personal gold loans range between Rs 20,000 and Rs 50.00 lakh. Processing fees start at Rs. 200+GST, depending on the loan term, while the effective annual interest rates begin from 8.95%. Realty gold loans are designed for Housing Loan borrowers of SBI (both existing and new). They range from Rs 50,000 to Rs 50.00 lakh. The processing fee for such loans is 0.50% of loan amount subject to minimum Rs. 500 + applicable GST. Realty gold loans can be used to pay for margin money requirements in housing loans, registration charges of house property or project price escalation.
Union Gold Loan
Union Bank of India disburses gold loans in less than 30 minutes. The institution offers a range of gold loan programs for various purposes like agriculture, retail, MSME, personal, and more. Loans can be granted against gold ornaments, jewellery and specially minted pure gold coins. There is no minimum loan amount for most loans and the maximum varies for different loan categories (e.g. Rs 50.00 lakh for MSME). The bank also offers an overdraft facility for individuals, farmers, and small businesses. Processing charges differ greatly from Rs 100 + GST to Rs 750.00 per case + GST, depending on the loan amount and its type. Interest rates range between 8,9% and 10,35%.
