Chennai: Elevated gold prices provide an opportunity for borrowers to raise more money for the gold they possess during financial exigencies. Compared to personal loans, for gold loans the cost of borrowing is lesser and processing of the loan hassle-free.
Gold prices have gone up more than 30 per cent this year and that means a borrower will receive 30 per cent more finance for the same quantum of gold he pledged last year.
Unlike other secured loans like a home loan or car loan, there is no restriction on the end use of gold loans and unlike personal loans, gold loans do not require a good credit history.
The loan amount is determined by the grammage of the gold and the requirement of the customer. However, the amount is capped at 75 per cent of the value of the gold.
The interest rates of gold loans range from 7.7 per cent and go up to 16 per cent with agricultural gold loans offered by public sector banks having interest rates at the lower end of the spectrum and those offered by non-banking financial companies at the higher end.
On the other hand, for personal loans the rates range between 9.99 per cent per annum to 44 per cent, According to Bank Bazaar, the rate depends upon the loan amount, credit score, and the repayment tenure. Most banks do not provide personal loans to customers with poor credit scores and if it is average, the interest rates go up.
Compared to personal loans, gold loan approval and disbursal processes are swift and hassle-free. While a gold loan can be sanctioned in 90 to 120 minutes, personal loans take 24 hours to seven days. The processing fees of personal loans range anywhere between 1 per cent to 6 per cent of the loan amount and for gold loans it ranges between 0.25 per cent to 2 per cent.
For personal loans, many banks prefer employees of multinational companies, private or public limited companies or government departments and seek salary slips/ IT returns of three months and bank account statements for three months.
For gold loans, the borrower has to be an Indian citizen and this makes the product accessible for entrepreneurs, businessmen, self-employed as well as homemakers.
