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Any person at any point of time can be in need of funds anywhere. In such situations arise the option of taking loans from various banks NBFCs in the market. Any loan can be of two categories - secured loans and unsecured loans. In unsecured loans the borrower can avail the loan without pledging any security while in case of secured loans, the lender provides the against some security which is known as collateral.
A gold loan is for any individual who has ownership over some gold ornaments or gold coins. This loan is provided against those gold articles at affordable interest rates in a few hours.
Comparison of other secured loans with gold loan:
Since there is a basic understanding of gold loans, we can start comparing gold loans with other secured loans. The below mentioned factors distinguish gold loans with other secured loans.
Interest rates: In all kinds of loans, be it secured or unsecured loans the one important thing everyone looks at is the interest rates. As unsecured loans are availed without pledging any security they usually carry higher interest rates. Talking about gold loans, interest rates range between 7%-20% per annum. This generally depends from one lender to another, but on an average basis interest rates are from 11%-16%. SBI Gold Loan is offering the minimum of gold loan interest rates i.e. 7%-7.5%.Other secured loans are provided against Life Insurance Policy which carry interest rates from 10%-12%. Loan against fixed deposits is provided at interest rates ranging from 7%-8%. Loan against mutual funds is also considered to be a good option and the interest rates are between 10%-12%.
Loan Amount: The common question asked is how much loan amount one can get against the pledge security. The loan amount in case of gold loan depends upon the overall market value of gold articles and is called Loan to Value (LTV). this LTV usually ranges between 65%-90%. In case of other secured loans i.e. in case of Loan against mutual funds, the loan amount typically depends upon the Net Asset Value (NAV) of the mutual fund unit. If anyone is taking a loan against Equity Mutual Funds Unit then the loan amount is usually upto 50% of the NAV whereas it can go upto 70%-80% in case of Debt Mutual Funds Unit. If anyone goes for a loan against Life Insurance Policy, then he can get the loan amount upto 80%-90% of the total surrender value of his traditional policy.
Tenure: When an individual applies for a loan he has to return the loan amount in a particular time period. This period is known as tenure. One can choose the repayment tenure according to his capacity and convenience.
Eligibility Criteria: another very important factor is the eligibility criteria for any gold loan. Before applying for any loan, one should be eligible for it. Eligibility criteria being the minimum for gold loan as it requires one to be above 18 years and should be having gold articles to avail the loan.
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