Why are gold bank loans preferred over NBFCs?
1. Interest rate
Understandably, the cost of borrowing comes first on most people’s checklists. Interest rates are determined by how much it costs lenders to arrange funds. Since NBFCs do not have access to large deposits, the interest rates they offer are considerably higher than those of established banks. Interest rates for NBFCs can be as high as 24-29%, while for banks, such as HDFC Bank, the numbers range from 11-16%. In addition, banks like
HDFC Bank also offer preferential interest rates to existing customers.
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2. Loan to value (LTV)
The loan-to-value ratio is the amount of loan you can get on a specific collateral. Price fluctuations do not affect the loan amount; however, the maximum limit has been capped by the RBI at 75% of the market value of gold. For example, on gold worth 5 lakh INR, you can get a loan of up to 3.75 lakh INR. However, compared to the interest you pay, a gold loan from a bank turns out to be lower than an NBFC.
3. Duration of occupation
Whether you need the funds to cover short-term or longer-term expenses, gold loans can provide you with immediate cash flow. Compared to NBFCs, banks offer loan terms up to 50% longer. For example, you can benefit from a
HDFC Bank Gold Loan
for a period ranging from 3 months to 24 months. A longer tenure can dramatically reduce your monthly expenses, helping you stay comfortably within your budget.
4. Terms of reimbursement
NBFCs and banks are doing well on this front. There are three basic reimbursement options to choose from:
a) NDE – For term loans where IMEs are payable monthly, you can opt for a regular repayment schedule that covers both principal and interest.
b) Initial interest – Here you can pay the interest up front and the principal amount at the end of the loan term.
c) Bullet payment – This option allows you to repay the interest and principal in one go at maturity. Here, interest is calculated monthly but is not collected until the end of the term.
If you take out a gold loan from HDFC Bank, you can even go for an overdraft facility. This option allows you to only pay interest on the money you use on the amount deposited into your account.
You can even supplement or renew your loan. So, depending on your current or expected income, you can choose any of these repayment options depending on what best suits your needs.
As compared to other loans such as a personal loan, availing of a gold loan is quite simple and straightforward. Also, gold loans are processed quickly as they do not require you to provide your credit score or proof of income. Therefore, banks and NBFCs sanction gold loans on the same day or within hours. If, however, you are looking for a super fast gold loan, HDFC Bank disburses gold loans in just 45 minutes with minimal documentation.
6. Customer service
Prompt customer service is an integral part of any loan; as a borrower, you may have urgent matters that need to be addressed. While most NBFCs have a customer support number, some of them are only available during business hours and days. But what if you need quick assistance with the loan renewal process outside of regular business hours? With HDFC Bank 24×7 customer service, including
ou can get instant responses to all your inquiries.
Finally, reading the fine print is essential when applying for a gold loan. There may be hidden fees and penalties that you are not aware of. Understanding the different terms and conditions can save you a sudden unpleasant surprise. So always look for a supplier that offers full transparency. For example, HDFC Bank provides all the conditions in advance and does not include any hidden charges.
A gold loan can help you meet your financial needs on your own, such as business needs, unexpected expenses, or medical emergencies. A gold loan from a trusted financial provider, such as
can help keep you financially afloat. Therefore,
apply for a gold loan
Disclaimer: This article was produced on behalf of HDFC Bank by the Times Internet Spotlight team.