Things to watch out for before taking gold loan | Gold finance|Infrastructure finance|It parks in india| IT parks kochi|Muthoot|Muthoot finance|Muthoot group|Non-banking finance company|Private finance| Renewable energy|Vehicle finance
Taking loan against gold is shown to be the easiest way to raise money either for business or to buy an asset like a house. With Kerala-based gold loans companies Manappuram and Muthoot Finance taking the gold loans business pan-India there are advertisements galore on the benefits of taking a gold loan.
Things to watch out for before taking gold loan | Gold finance|Infrastructure finance|It parks in india| IT parks kochi|Muthoot|Muthoot finance|Muthoot group|Non-banking finance company|Private finance| Renewable energy|Vehicle finance
1. Things to watch out for before taking gold loan
Taking loan against gold is shown to be the easiest way to raise money either for business
or to buy an asset like a house. With Kerala-based gold loans companies Manappuram and
Muthoot Finance taking the gold loans business pan-India there are advertisements galore
on the benefits of taking a gold loan.
But gold loans are not for everyone and there is more than what meets the eye when
raising loans against gold. Here is a checklist on what to look for when taking a gold loan.
Do you really need a gold loan? Gold loans were earlier taken mostly by traders and
businessmen to meet the credit shortfall in their business cycle. Today, the salaried class
is also being encouraged by the companies to take gold loans since the interest rates are
low compared to personal loans or credit card cash advances.
Taking a gold loan to meet a shortfall in the downpayment of housing loans is okay but
taking a gold loan to trade in the stock markets or to service credit card dues is a certain
no-no.
How much money can be raised through gold loans? It depends on the amount of gold
pledged. On paper NBFCs are believed to give 75 per cent of the value of gold against
60-65 per cent by banks but due to the stiff competition many NBFCs are giving even 85-90
per cent of the value of gold as loan. The loan amount could vary anywhere between Rs
25,000 to about Rs 10,00,000 while few NBFCs offer loan amounts more than that.
What are the interest rates on gold loans? Here again there is a difference between NBFCs
and banks. NBFCs charge 20-24 per cent as against 12-14 per cent interest rates charged
by public sector banks but NBFCs are believed to be faster in disbursing gold loans with
many promising loan processing time as low as five or even three minutes.
What are the other charges? One should not get carried away by the attractive interest
rates on gold loans as there are half a dozen other charges for gold loans like the handling
and processing fee of about 0.25-0.50 per cent, gold assessing charges of about one per
cent and also custodial charges for safekeeping of your gold. Like most other loans gold
loans too come with pre-closure charges though a few NBFCs promise exemption of the
charges.
How is the repayment process? Many NBFCs allow the borrower to repay the loan as soon
as he gets the money and retrieve his gold. Here the interest would be charged only on the
basis of the number of outstanding days of the loan, which could be as less as three days.
Banks on the other hand have an organised repayment structure like any other loan.
When it comes to gold loans, what many experts advise is that one can take a loan against
gold only when one is sure of repaying the loan and getting the gold back otherwise, there
is a possibility of losing the gold despite having taken only 70 or 80 per cent of its value as
a loan.
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