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Interest rate is a major concern when one tries to take any loan. Getting a low interest loan partially depends on the borrower’s credit profile and partially the lender’s lending rates. As gold loan is a secured loan, it is possible to get a low interest than many other loans. For example, a personal loan will have higher interest rate than any other loans in the market.
All banks and NBFCs provide loans against the gold pledged by the borrower. The interest rates with such financial institutions generally range between 9.75% to18%. In addition to the interest, you also will have to pay a processing fee that could range between 0.50% to 2% + GST and Gold appraisal charges.
Individuals with a good credit score can enjoy a slight reduction in the interest rate than individuals with low or no credit score. Other than that, if you are pledging your gold with the bank where you have a loan or savings account, you may get low interest rate on your gold loan. However, this too depends on the lenders’ internal policies.
People involved in agriculture and allied activities can get the lowest interest rate on gold loans. Every bank has an agri-gold loan scheme that offers a reduced interest rate. The interest rate on such loans starts from 7% and it can go up to 9% depending on the loan amount. Moreover, farmers can enjoy interest subvention beside the declared interest rate which can further reduce the interest burden. You must also remember that gold loan obtained under this scheme must be used only for agriculture purposes. Hence, RBI has instructed the banks to do a thorough investigation on the end-use of the loan and documents submitted.