One of the most common loans, a gold loan allows users to get access to funds by pledging their gold ornaments as jewellery as security. The application process of a gold loan is pretty straightforward as compared with other unsecured loan options. But the interest rate differs when you take a gold loan from a bank, NBFCs and gold loan apps. Over the years, the advancement in technology has offered several options for borrowers seeking a gold loan. But there are some factors that must be considered to make borrowing easy and useful; read the blog and understand the same.
What Is a Gold Loan and How Does It Work?
A secured loan where users offer their gold as collateral with the lender, banks, NBFCs or gold loan apps and get access to quick funds. The process of taking a gold loan includes:
- The purity and valuation of the gold that is given by the applicant are done by the lender.
- The loan amount is offered as per the policies and loan-to-value requirements of the lender.
- The applicants provide required documents to the lender, and once the verification is done and approved, the loan amount is disbursed.
- Within the applicable tenure, the borrower makes the repayments, and once the outstanding balance is completely paid, the gold is returned.
What Should You Know About Bank Gold Loans?
Digital gold loan apps have been becoming popular among many users; there are some who still choose the traditional option of taking a gold loan, and that is banks. Borrowers who prefer a face-to-face interaction with the authorities choose banks for borrowing funds against gold. Some key points to consider:
- An established process is followed by the banks with structured valuation of gold and processing steps.
- For valuation, documentation, and other formalities, borrowers get to visit the branch.
- While the rates may vary between banks, they are also based on the profile of the borrower and the present loan scheme.
- Different banks provide different repayment options to the applicants.
- It is essential to check some additional charges like processing, valuation, documentation, and other applicable fees.
- There is complete security for your gold, as the lender stores and safeguards it.
How Do NBFC Gold Loans Work?
Another common option for individuals to apply for a gold loan is NBFCs. A gold loan app is also sometimes associated with NBFCs. They are known for offering a seamless branch-based process and focus on secured lending. Consider these things before choosing an NBFC:
- Check the processing speed of the lender; it helps when there are emergencies.
- Learn about the process of interest rate calculation and the complete structure.
- Do your research and compare interest and repayment options.
- Consider reading the tenure of repayment and other conditions offered by the lender.
- Don’t forget to check the applicable charges and review the lender’s policies on storage and security of the gold.
What Should You Check in a Gold Loan App?
With the use of digital lending platforms, accessing information regarding financial products has become much easier. The user-friendly interface of a gold loan app helps users check the loan details, requirements and initiate the process from home. Make sure to evaluate the following when using a gold loan app:
- Ensure the lender you choose is reliable and registered.
- Avoid relying on advertised interest rates and learn about the real rate charged.
- Check all the applicable charges, including processing and service fees.
- Check the documents that are required for a loan application.
- Understand the repayment terms and security features of the app.
- Read all the terms associated with the loan.
Bank vs NBFC vs App: Rate and Feature Breakdown
Here’s a complete breakdown of banks, NBFCs and gold loan apps:
1. Public Sector Banks
The government banks usually charge 8.5% to 9.5% per annum interest rates on gold loans, which is considered the lowest in the market with higher safety. However, the process is slower and has strict valuation and a lower LTV.
2. Private Sector Banks
These banks normally charge 9% to 19.76% per annum interest rates on gold loans. The process is quick with digital disbursals, and they even offer good rates to those with salary accounts or to someone who is an old customer. But the rates are slightly higher than public banks for non-account holders and might charge additional fees.
3. NBFCs
The usual interest rate charged is 11.9% to 24% and more annually. They offer instant cash quickly against the pledged security and have higher LTV, usually up to 85%. The interest rate is higher than other options, and users are required to have strict repayment discipline.
4. Gold Loan Apps
Gold loan apps charge an annual interest rate of 9% to 21% and provide app-based tracking and home visits with a quick process. Applicants need to be careful regarding hidden terms and fees.
Conclusion
Comparing banks, NBFCs, and a gold loan app can help borrowers understand differences in interest rates, processing, repayment flexibility, and service experience. Bajaj Finserv is one option borrowers can consider, offering gold loans with quick disbursal, minimal documentation, free gold insurance, and flexible interest-payment and repayment options. The loan amount can extend up to ₹2 crore, subject to applicable terms and eligibility.
Ultimately, borrowers should compare the complete loan structure and choose an option that aligns with their financial requirements and ability to repay.
