Friday, 19 January 2018

Which Gold Loan Is Best?

Gold loans are a quick fix solution when you are in need of money. Like personal loan they can come in handy in various situations and can solve the cash crunch. Most NBFCs and commercial banks offer loan against gold so if you are looking at seeking money against gold then you will have multiple options but which is the best option and how do you choose the lender.
Gold Loan Basics:
Loan can be sought against gold jewelry and coins too and one could choose to borrow from a NBFC or a commercial bank. The bank gives a proportion of the market value of the gold as loan; this is known as the loan to value ratio.
Earlier there was no uniformity in the LTV ratio for a gold loan but RBI has now laid down norms for this. Thus all lenders can now sanction loan up to 75% of the market value of the gold. This levels the playing field for all borrowers and now the borrower will not choose a lender based on this factor but will focus on other factors when deciding where to take a gold loan from.
Choosing the Right Gold Scheme:
As we are well aware that the same product is offered by different lenders, it is important that we choose the right lender as per our requirements. Thus it is not so much as what the lender offers but what meets our requirements decides who to take the loan from. The factors that impact the decision making are:
Ø  Interest Rate: Whenever you take a loan, interest rate is a crucial factor for decision making. Nobody wants to pay high interest, but this is not the sole factor on which decisions will be based. Thus if other requirements are met then you would like to choose the lender that offers the lowest interest.
Ø  Processing Fee: Lenders charge processing fee for all loans, thus is in an important cost that must be considered when making a decision. Some lenders may have a flat processing fee while others may charge it as a percentage of the loan amount. Mannapuram finance charges the lowest processing fee but that factor will not make it the best gold lender.
Ø  Prepayment Charges: Sometimes the borrower may want to repay a loan earlier than the tenure gets over; they may be dissuaded from doing so due to a prepayment charge that may be levied by some lenders. Again this may vary from nil to a percentage of the loan amount.
Ø  Loan Tenure: Lenders may sanction loans for time duration ranging from a day to years. If you want a loan for a very short duration like a few days you may want to consider borrowing from Muthoot Finance or Mannapuram Finance while if you want a longer duration loan then SBI or HDFC could be a good choice.
Below is a table that gives a comparison between a few gold loan providers:

Interest Rate
Processing Fee
Prepayment Charges
Loan Tenure
Muthoot Finance
12% to 24%
0.25% to 1% of loan amt
1 day to 15 months.
Mannapuram Finance
14% to 26%
Rs. 10 (to be paid at time of settlement)
1 day to 3 months.
SBI Gold Loan
0.51 to 1.01% of the loan amount subject to a maximum of Rs. 1022.
3 to 30 months.
10.50% to 15.95%
0.25% to 1.00% of loan amount
Range from Nil to 1%
6 to 48 months.
10.50% to 16.50%
1% of the sanctioned loan amount
Range from Nil to 1%
6 to 12 months.

So as we said earlier the best gold loan will depend on what you require. Other factors that must be taken into consideration include the maximum and minimum amount available as loan and also the documentary requirements of the lender. Gold loans unlike other loans do not require any credit score requirement. Thus you can be saved from the compulsion of taking a bad credit personal loan for an exigency and you can unlock the power of your gold to help you in need. 

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