Gold Loan Interest Rate

Gold Loan Interest Rate 

If you are looking for a quick and safe way to get instant credit at comparatively lower interest rate starting just at 10% onwards, then a gold loan could be an ideal choice. Not only does this type of loan provide security during uncertain times and in financial crises but it also works as a collateral to secure loans. Gold loan is a secured loan product and hence, it can be obtained at lower interest rates compared to other types of loans. The bank or lending institution decides the gold loan interest rate based on several factors like quantity of gold, purity and weight, current market price of gold, inflation, etc. 

Gold Loan Interest Rates and Other Fees 

Take a quick look at some of the other charges that are applicable when you opt for a gold loan: 

Note: Gold loan interest rates are dynamic in nature and can be influenced by several factors.

Gold Loan Interest Rates Comparison

Check out the lower gold loan interest rates and loan amount that some of the top banks and NBFCs offer - 

Interest rates mentioned in the above table can vary as per the policy of bank/NBFC.

Types of Gold Loan Interest Rates 

There are two types of gold loan interest rates:

1. Fixed rate of interest: In this type of gold loan interest rate, the EMI amount remains the same as there is no change in the rate of interest for the entire loan tenure.

2. Floating rate of interest: If you have opted for a floating rate of interest then your gold loan interest rate will change as per fluctuations in the gold price.

While the fixed rate of interest is a little higher than the floating rate in some cases, it offers more certainty. Hence, if you have an understanding of the market and are expecting the gold rates to increase or decrease in the near future, then you can opt for the type of interest accordingly.

Factors Affecting Gold Loan Interest Rates 

If you are thinking of opting for a gold loan, it is necessary to understand the factors that will affect gold loan interest rates. 

• Market Price of Gold 

The gold loan interest rate is calculated based on the price of gold in the market when the loan application is received. If the price of gold at that point is high, then it automatically means that the price of your gold ornaments or coins is also high, which is why lenders offer a lower rate of interest as the associated risk is lower. 

• Inflation

Rising inflation rate means that value of currency is depreciating, thereby encouraging people to accumulate gold. Gold coins, ornaments, etc., act as a hedge during inflation and that is what increases its price in the market during such times as well. If you are opting for a gold loan in such times, then there are very high chances of getting a low gold loan interest rate from most lenders.

• Working Relationship with Bank

There are many lenders who offer gold loans to their existing customers as they already know their repayment history and creditworthiness in most cases. Individuals who don’t have a history with the bank can also apply for gold loan, but existing customers are in a better position to discuss gold loan interest rates and negotiate accordingly.

• Other Factors 

The gold loan interest rate charged by the bank can also be related to the loan amount requested by the applicant. However, this depends on the bank or lender you approach for a gold loan as it is not a common practice amongst all lenders.

Some lenders even factor in the quantity and quality of gold jewellery that are kept as collateral. Most banks don’t accept gold ornaments below 18 karat and approve gold loan applications only once the bank nominated appraiser has examined the gold or gold jewellery, coins, etc.