Why Gold Loans from Banks are better choice?

Why Gold Loans from Banks are better choice?

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With gold prices at an all-time high, gold loans have become a sort of lifeline for small businesses, traders, and salaried and self-employed individuals who are looking for a respite from pandemic-induced financial woes. One of the first decisions to make when looking for a financial institution that offers gold loans is choosing between a bank and a Non-Banking Financial Company (NBFC). Now, several factors determine which is a better option, from interest rates to the safety of the gold you have pledged and several other things. With banks and NBFCs offering almost similar deals, how do you make the right choice? Read on to find out how gold loans offered by banks and NBFCs stack up against each other:
1. Interest rate
The cost of borrowing, quite understandably, comes first on the checklists of most people. Interest rates are determined by how much it costs lenders to arrange for funds. Since NBFCs do not have access to large deposits, the interest rates they offer are considerably higher compared to established banks. Interest rates for NBFCs can go as high as 24-29% while for banks, such as HDFC Bank – the figures range from 11-16%. In addition, banks like HDFC Bank also offer preferential interest rates to existing customers.
2. Loan to Value (LTV)
Loan to Value is the amount of loan you can get on specific collateral. Price fluctuations have no bearing on the loan amount; however, the maximum limit has been capped by the RBI at 75% of the gold’s market value. For example, on gold worth INR 5 lakh, you can get a loan of up to INR 3.75 lakh. However, relative to the interest you pay, a gold loan from a bank works out to be lower than an NBFC.
3. Tenure
Whether you need funds to cover short-term expenses or for a longer period, gold loans can provide you with immediate liquid cash. Compared to NBFCs, banks offer up to 50% longer loan tenures. For instance, you can avail an HDFC Bank Gold Loan for a tenure ranging from 3 months to 24 months. A longer tenure can reduce your monthly outgo considerably, which in turn helps you comfortably stay within your budget.
4. Repayment Terms
Both NBFCs and banks score well on this front. There are three basic repayment options to choose from:
a) EMIs – For term loans where tha) EMIs EMIs are payable monthly, you can opt for a regular repayment schedule which covers both principal and interest.
b) Upfront interest – Here you can pay the interest upfront and the principal amount at the end of the loan tenure.
c) Bullet payment – This option lets you repay the interest and principal in one lump sum on maturity. Here the interest is calculated every month but collected only at the end of the tenure.
If you are taking a gold loan from HDFC Bank, you can even opt for an overdraft facility. This option allows you to pay only the interest on the money you utilise out of the amount disbursed into your account.
You can even top-up or renew your loan. So, depending on your current or expected income, you can choose any of these repayment options based on what best fits your needs.
5. Convenience
When compared to other loans such as a personal loan, availing a gold loan is quite easy and straightforward. Besides, gold loans are processed quickly as they don’t require you to provide your credit score or income proof. Therefore, banks and NBFCs sanction gold loans on the same day or within a few hours. If, however, you are looking for a super-quick gold loan, HDFC Bank disburses gold loans in just 45 minutes with minimal documentation.
6. Customer service
Prompt customer service is an integral aspect of any loan; as a borrower, you may have urgent queries that need to be addressed. While most NBFCs have a customer helpline number, some of them are available for service only during working hours and days. But what if you need quick assistance on the loan renewal process outside of regular working hours? With HDFC Bank’s 24×7 customer service, y ou can get instant answers to all your requests.
7. Fees
Finally, reading the fine print is essential when applying for a gold loan. There may be hidden charges and penalties of which you are unaware. Understanding the various terms and conditions can save you from a sudden unpleasant surprise. So, always look for a provider that offers complete transparency. For instance, HDFC Bank provides all the terms up front and does not include any hidden charges.
A gold Loan can help you fulfil your financial needs on your own like business needs, unplanned expenses, or medical emergencies. A gold loan from a trusted financial provider, such as HDFC Bank can help you stay financially afloat. So, apply for a Gold Loan now!
Gold Vs Personal Loan
The eligibility criteria and the due diligence for personal loans are much stricter because they are unsecured. In case of default, the lender does not have the option of selling the borrower’s assets.
Interest rates on personal loans vary from 16 per cent to 24 per cent, excluding the processing fee, which is 1.5-2.5 per cent of the loan amount.
Value for Gold: NBFCs and banks head-to-head on gold loan parameters
The loan amount depends on income. The limit is Rs 15-20 lakh depending on income and credit history. For salaried people availing of personal loan from ICICI Bank, the net monthly salary has to be at least Rs 20,000, while for taking a loan from HDFC Bank, the monthly salary has to be at least Rs 15,000.
Then there are pre-payment charges that could be as high as 5 per cent of the outstanding loan amount. Unlike in gold loans, both interest and principal have to be paid in monthly instalments.
FundsTiger can arrange loans from all above mentioned banks you can apply for an attractive offer with best possible Rate of Interest and Terms for Personal Loan, Business Loan, Home Loan and Car Refinance Loan.
FundsTiger is an Online Lending Marketplace where you can avail fast and easy Home, Business and Personal Loans via 30+ Banks and NBFCs at best possible rates. We will also help you to improve your Credit Score. We have dedicated Relationship Managers who assist you at every step of the process. We can also help you in Balance Transfers that will help you reduce your Interest Outgo

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