The gold prices, most of the time, remain high and gold loans have become a much better option for all kinds of traders, merchants, businesses, salaried persons and self employed individuals who are looking for financial support to meet up to their financial woes. Here comes the first, which is also important, decision to choose a financial institution that offers gold loans, whether a bank or an NBFC (Non Banking Financial Companies).
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There are several factors that determine which is a better option, from the interest rates to the safety of the pledged gold and many other things. While banks and NBFCs offering almost similar deals, let us see the factors that differentiate them:
Interest rate: Interest rates are determined by how much it costs lenders to arrange for the funds. As NBFCs are not having access to large deposits, the interest rates they are offering are much higher as compared to those of the established banks. The interest rates for NBFCs can go high up to 24 to 29%. While for the banks like HDFC bank (HDFC Gold Loan), the interest ranges from 11 to 16 per cent.
Loan to value (LTV): The amount of loan that you can get on specific collateral is called a loan to value. The maximum limit that has been capped by the RBI is at 75 per cent of the gold market value. However, as compared to interest (Gold Loan Interest Rates) you pay the loan from a bank turns out to be lower than an NBFC.
Tenure: If you require funds to cover short term expenses or for longer term, gold loans can provide you instant funds. In comparison to NBFCs, banks are providing 50 per cent longer loan tenures. A longer tenure reduces your monthly outgo and can help to keep up to your budget.
These factors may surely help you to make the right decision and choose a better option for you.
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