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Bank vs NBFC .Which is the Best?

Bank Vs NBFC: Which is the Best?

Comparison between the 2 is done to rule out the one which offers Lowest Interest Rates and Maximum convenience to the Borrower for availing Gold Loan.

Bank:

Banks are financial institutions which are regulated and are licensed by Reserve Bank of India (RBI) to receive deposits and offer loans. They also offer services like issuing of cheques and demand drafts. provide financial services such as wealth management services and currency exchange. Banks include both public and private sector banks like State Bank of India, Punjab National bank, ICICI Bank, HDFC Bank etc.

NBFC:

NBFCs are financial institutions that are allowed to lend and make investments like that of banks but do not hold banking license and are not allowed to :

  • accept demand deposits
  • do not form part of the payment and settlement system and cannot issue cheques drawn on itself
  • deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

NBFC include Muthoot Finance, Mannapuram Gold Loan, Muthoot Fincorp, IIFL, Capital First etc. those offers Gold Loans.

Nowadays, many people find themselves in a dilemma whether to choose Bank or NBFC for taking a Gold Loan. There are certain factors and risks associated which must be considered by you while making a Decision.

We, at GoldLoanBazaar.com, have conducted detailed research and analysis on ” Bank vs NBFC ” which may help you to get out of the dilemma and make the right choice based on the factors stated below:

1) Interest Rates:

The rate of interest is one of the main aspects of all types of loans. NBFC usually charge a higher rate of Interest as the cost of funds for NBFC is higher and they are not authorized to accept funds in form of Demand Deposits. The Rate of Interest charged by Banks is much lower as Banks have got access to low-cost funds that they accept in form of deposits from the public. Also, there is a high risk of defaults in case of NBFC, so they charge higher interest rates to offset the unforeseen losses. You can save your hard earned money by Comparing Gold Loan Interest Rates and making the decision accordingly.

2) Loan-to-Value:

Loan to Value ratio, popularly called as LTV, is usually less in case of NBFC. As per RBI guidelines, NBFC is allowed to provide up to 75% of LTV of Gold pledged as collateral. This is mainly because of the high risk of default in case of NBFC. Whereas, banks offer higher Loan to Value (LTV ) which may be as high as 85 %.

3) Time Taken for Gold Loan Disbursement:

Gold Loan in 2 or 5 or 10 minutes is none other than a myth or a marketing Gimmick. It is most commonly adopted by the NBFC to lure customers for getting quicker and faster loans. In practicality, it’s impossible to evaluate the gold, its processing and loan disbursement in such a short span of time. You must not get flattered by such practices and offers.

But indeed, most banks and NBFC usually takes around 30 minutes to a few hours. It depends on the fulfillment of their eligibility criteria and the documents required to avail the loan. Needless to say, the Gold loan is the easiest and fastest way to get liquidity as compared to its most sought alternative i.e. personal loan.

4) Disbursement of Cash:

The banks do not pay in cash for the loan amount sanctioned by them. All the sanctioned loan amount is transferred to Borrowers bank account either by the way of Cheque or Account transfer or NEFT/RTGS as desired by the Borrower. But NBFC is allowed to disburse gold loans only up to Rs 20,000 in form of cash(as per RBI guidelines. Earlier it was Rs 1,00,000). For loans amounting above Rs 20,000, NBFC also goes cashless. They transfer loan amount either by the way of Cheque or NEFT/RTGS directly in Borrowers Bank account. This move is in line with the rules issued under the Income-tax Act.

5) Bank Vs NBFC Regulation:

All the banks are regulated by RBI whereas NBFC is a company registered and regulated under the Companies Act, 1956.

6) Gold to be Pledged:

As per RBI guidelines, Banks are only allowed to accept Gold Jewellery and Gold Coins (only up to 50 grams and of 99.99 % purity issued by Banks only in India ). Whereas NBFC is only entitled to offer Loans against Gold Jewellery only. NBFC is not allowed to offer Loans against Gold Coins.

7) Carat Requirement:

Minimum carat requirement in case of both banks and NBFC is 18 ct (75 % Gold Purity ) to 24 ct. Jewelry below 18 carats is not considered eligible for Gold Loan. Pledging spurious or fake Gold Ornaments for taking Loan is a punishable offense under IPC. This could end you up in Jail.

8) Gold Loans for Agriculture Purposes:

Banks provide special interest rates which are usually lower as compared to Normal Interest rates for Agriculture Gold Loans. Here, the borrower has to provide the proof of Landholding to get benefits. Concessional Loans are also offered to senior citizens and Women. Whereas, most of the NBFC does not offer any concessional or special interest rates for such Loans.

On the Basis of the above factors, one can easily differentiate between Bank vs NBFC and make the decision accordingly.

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Gold Loan Bazaar

All About Gold Loan

All About Gold Loan

As the name suggests, Gold Loan is a type of loan which is granted in lieu of Gold ornaments. The Gold Ornaments are pledged by the Borrower to the Lender. The Lender can be a Bank/NBFC which are authorized by the Reserve Bank of India (RBI) to offer Gold Loan. Often called by other names such as Loan Against Gold, Jewel Loan also. It is a type of secured loan as it is granted against the Gold ornaments pledged by the borrower. Many Nationalized Public and Private Sector Banks and NBFC’s offer Gold Loan in India.

Benefits / Features of Gold Loan

  • You can avail a Gold Loan at Lower Interest Rate as compared to other Loan options. You can just  Compare Gold Loans online at GoldLoanBazaar.com and you can see the Gold Loans offered by various Banks/NBFC’s and on the basis of comparison choose the one that suits your needs.
  • Gold Loans are Less Time-consuming Loans and offer Instant Liquidity to the Borrowers as compared to other Loans.
  • Gold Loan amounts are starting from Rs 1500 with no upper limits depending on Various Banks/NBFC’s.
  • Lower the LTV (Loan-to-Value), Lower will be the interest rates i.e. Lower the Loan amount per gram, lesser the interest to be paid by the borrower( Depends upon Banks and NBFC’s )
  • Flexible interest and principal repayment options as per the convenience of the borrower. You can easily pay interest along with EMI or at the time of  Loan closure. Some Banks also provide Bullet Payment options i.e. pay all the Interest and Loan Principal at the time of the end of Loan Tenure or Loan Closure.
  • Flexible Loan Renewal options are also available if the borrower wants to renew its loan.
  • You need not provide Guarantor in order to avail a Gold loan. Therefore, no need to find someone to back you when applying for your loan.
  • Very less Documentation as compared to other loans. You can provide simple ID and Address proof in order to avail a Loan.
  • A Less time-consuming process as it takes almost 30 minutes to few hours to test Gold, it’s Processing and Disbursement.
  • Prepayment facilities are also available with zero repayment charges to certain amount or percentage depending on the Banks/NBFC.
  • Very Less to No valuation charges are there for your Gold Loan depending upon the Banks/NBFC’s

Other Important Features:

  • You need not provide any Income Proof or Income Tax Return (ITR) documents to avail the Gold Loan. Thus unemployed and non-working people can also avail Gold Loan.
  • No CIBIL score is required as CIBIL score is not mandatory for availing Gold Loan.
  • You need not provide any specific reason to the Lender in order to avail a Loan. You can avail it for various purposes like Gold Loan for Medical Emergency, Gold Loan for starting a new business or Gold Loan for Business Expansion, Gold Loan For Higher Education of Kids, Gold Loan for construction or repairs of Home, Gold Loan for Marriage purposes, Gold Loan for Agricultural purposes and for other financial problems or any other sort of requirement.
  • Very less and Special Interest rates are available for Gold Loans for Agriculture Purposes. Just one has to provide the proof of agriculture-related documents.
  • You can get a Gold Loan at Lower/Concessional Interest Rate (for Women customers).
  • You are also eligible for Top-up Loan if the Gold Rate /Gold Price increases in the Market. The decision to provide Top up or not solely depends upon the Bank or NBFC.
  • You can easily close Gold Loan anytime by paying the Loan amount plus the interest dues. No other documentation and liabilities.
  • It also helps in Improving the credit history of the Borrower.

How does Gold Loan work? 

Here the Borrower consent to pay the Lender a certain amount of Interest on Gold Loan during the Loan period and thereafter payment of principal and remaining dues at the time of taking back its gold and is abiding by the terms and conditions which both have agreed upon at the time of Loan.

And, the Lender agrees to pay the Borrower the amount agreed for a loan in lieu of Interest and also agrees to return the gold in the same condition as at the time of taking the Loan.

You can pledge collateral in the form of Gold ornaments and gold coins(up to 50 Grams). Ornaments must have a minimum purity of 18 ct. and up to 24 ct. Below 18 ct. gold ornaments and Gold coins below 24 ct. are not eligible for taking the loan.

Valuation Process Of Gold for Loan:

You have to take the Gold that you wants to pledge for money. Appraiser/valuer/assessor authorized or appointed by the Lender will appraise your gold ornaments. On the basis of the valuation, the Lender will quote the maximum amount it can offer against the gold. You can proceed further if you agree with the above valuation of gold, the rate of interest and other charges.

In case if you cease to repay the interest, the lender, as the possessor of the Gold, has the authority to auction your gold ornaments to recover its dues i.e. loan principal and interest overdue. Therefore, it is always commendable to repay interest and all dues on time to avoid any situation/circumstances like this.

Do’s and Don’ts

You must keep these facts in mind while applying for a Gold Loan :

  • You should Compare Loans offered by various Bank’s/NBFC’s based on Gold Loan Interest Rates, processing fees, prepayment charges, and other allied fees and penalties. Compare the loans using GoldLoanBazaar Comparison tool and choose the best loan that suits your needs.
  • You should pay Interest and Renewal Fees on time so as to avoid Late payment charges and penalties.
  • If the omission of payment continues, Lender reserves the right to auction your gold to recover their loan and dues.
  • Pledging Spurious/Fake/Stolen Gold Ornaments for availing Gold Loan is Illegal and is a punishable offense under IPC.

Essential Documents Required for Gold Loan:

  • Identity Proof such as Passport, Voter ID card, PAN card, Driving License, Aadhar Card, Address Proof such as Electricity Bill, Aadhar Card, Telephone Bill, Ration Card, Driving License, Passport Copy.
  • Proof of landholding in case of Agriculture Loan
  • Passport Size Photographs

 

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