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Mumbai, January14 :It is a clear settlement between the interest rates and convenience for the gold loan prospective borrowers. Gold Loan lenders especially NBFC’s such as Muthoot and Manappuram offer loans within certain minutes. On the other hand, HDFC Bank takes around 24 hours to sanction these loans. Even the disbursement can take a few days.

 

Parameters

NBFC’s

Banks

Interest rates

17 % to 18 %

15 % to 16 %

LTV

75 %

80 % to 85 %

 

 

Difference in Interest Rates:

Banks charge around 12 % to 13 % on the loan while NBFC’s charge around 14 % to 17 % on the loan. The lowest rates on the Gold Finance for NBFC’s are 12 %. However, these NBFC’s hardly offer the loan on these rates.

NBFC’s charge high rates because they take their funds from the banks.

 

Difference in Loan to Value:

Banks have maintained their edge in the LTV parameter. Banks provide the LTV of the 80 to 85 %. However according to new RBI policy; NBFC’s can provide loans with LTV of 75 % to the borrowers. Recently RBI has allowed NBFC's to provide loans at 75 % value of the Gold.

 

Read More:

RBI Increased NBFCs Gold Loan Limit to 75 per cent 

 

Which lender to choose for short term need?

If you want to raise money in a short interval of time, you can opt for NBFC’s at high cost and lower LTV. For instance if a person takes a loan of Rs 1 lakh from a bank for a tenure period of one year, the EMI levied will be Rs 9026. Though, while taking from NBFC’s the loan EMI can stand about Rs 9168.

 

Which lender to choose for long term needs?

If a person wants to avail loan for few years, for child education, he can approach  the bank.

Sometimes besides a huge rate difference, a person can get a larger amount on the same amount of gold. If you have gold jewellery of Rs 1 lakhs and want a loan against it, you will get around Rs 60,000 from the bank, and NBFC will give you around Rs 55,000.

According to Muthoot Finance, the rate of interest wholly depends upon the LTV. If the Loan to value ratio is high, gold finance company charges high interest rates.

In order to get lower rates of interest, one can go to lower LTV finance.