India is one of the largest consumers of gold in the world. As per the World Gold Council (WGC), the annual gold demand in India from 1987 until recently has increased by nearly 804%. And the trend is not expected to die anytime soon. The precious metal other than being used for industrial, commercial and investment purposes can also be used to get a loan in case of a financial emergency.
The gold loan is one of the easiest and fastest ways to access funds when a situation arises. Even if you have a low credit score but good amounts of idle gold in your locker, the gold loan can be the monetary solution for you.
With the growing popularity of gold loans every year, it is important to know not only what gold loan is but also how it works, gold loan interest rates, and other related details. In this article, we will discuss and compare two main gold loan providers, Muthoot and Manappuram gold loan.
What is a Gold Loan?
The gold loan is a secured loan that a borrower takes from a lender in lieu of gold ornaments such as gold jewellery. The loan amount sanctioned to you by lenders is generally a certain percentage of the gold’s value. You can repay it through monthly installments after which you get your gold articles back.
Unlike other secured loans such as a home loan or car loan, there are no restrictions on the end-use of gold loans. So, whether you need to fund a wedding, family vacation or your child’s education, it is a great way to meet your sudden money requirement. Moreover, a lot of private and nationalised banks along with NBFCs offer gold loans at affordable interest rates.
Gold loan processing is somewhat similar to other secured loans. In this, you take your gold ornaments to a lender along with the required set of documents. The lender evaluates the gold jewellery and verifies the submitted documents. As per the evaluations, the lender sanctions the loan amount. As per the loan agreement, you pay off the principal amount along with the interest amount and get the pledged gold articles back.
Manappuram Finance Limited
Manappuram Finance Ltd. is considered to be one of the most popular gold loan providers. The company charges interest only on the period for which you availed the loan and the maximum loan amount available is Rs. 1 crore. The company determines the loan amount based on the weight, purity and market value of the jewellery pledged. Key points to note about Manappuram Gold loan:
Minimum Requirements: A certified copy of Passport, Driving License, Aadhaar number, Voters ID, job card issued by NREGA duly signed by an officer of the state government and letter issued by the NPR containing details of name and address, one recent photograph, PAN copy or Form No. 60 as defined in Income-tax Rules,1962.
Pay interest only for the exact period of the loan, and to the exact number of days.
Different schemes for different needs, to suit all income groups.
Muthoot Finance is ranked among the top gold loan providers in India. With numerous outlets across India and attractive interest rates, you may decide to go for this option taking advantage of their minimal documentation requirements and extremely short processing times.
Some of the key features of Muthoot Gold loan include:
Quick loan disbursal
Minimum loan amount of Rs. 1500 with no maximum limit
Pre-payment option-without any penalty
In-house gold evaluation
Best customer service with a shorter response time
Safe custody for gold ornaments
Comparison of Gold Loans Provided by Manappuram and Muthoot
|Eligibility||Anyone above 18 years of age with gold jewellery of 18 carats or more to pledge||
Anyone above 18 years of age with gold jewellery of 18 carats or more to pledge
|Max/Min Loan Amount||Up to Rs 1 crore||
Rs. 1,500 to Rs. 1 crore
|Loan Tenure||Up to 12 months||Up to 15 months|
|Interest Rate||Base rate + 3% onwards||14% onwards|
|Processing Fees||Up to Rs. 200||Up to Rs. 500|
|Prepayment charges||No prepayment penalty charges||
No penalty charges for prepayment
|Late Payment Charges||3% on the outstanding principal amount from the date of default||
Penal interest rate depends on various factors and is printed on the loan agreement
Eligibility for Gold Loan
A gold loan can be sought by any individual who has gold reserves. Personal loans normally include stringent eligibility criteria. However, gold loans can be availed by any Indian resident, which can include salaried professionals, businessmen, housewives, and even farmers. You don’t even need to have a good credit score to be eligible for a gold loan. If you have a low credit score, you still have a chance to get funds, provided you have enough gold to pledge for it.
Gold Loan Tenure
Before approving the loan application, lenders evaluate the pledged gold’s purity and weight. Based on this, the gold’s market value is determined at its current rate, which further helps in reaching the final gold amount that is to be sanctioned by lenders.
Most lenders offer a gold loan with a value up to 75 per cent of the pledged gold’s market value. For instance, if your gold is worth 2 lakhs, the loan amount sanctioned to you would be no more than 1.5 lakhs. Besides the Loan to value ratio, the loan amount also depends on various other factors such as tenure and the borrower’s repayment capacity.
Gold loan is becoming a word of mouth nowadays. The process of pledging money against gold has existed since ancient days but today the overall process has become more formal and transparent with an entry of organised financial players. Muthoot Finance and Manappuram Finance are two of the biggest gold loan finance companies. Read the article above to find out key comparisons between the two players.