Cross-check with multiple lenders for accurate valuation
Business Standard|March 07, 2024
For fairer assessment, select a lender that uses an external assayer
KARTHIK JEROME

  Two developments in the recent past have put gold loans in the spotlight. Kotak Mahindra Bank forayed into this rapidly growing segment (17.4 per cent growth year-on-year, according to the Reserve Bank of India's [RBI's] data of January 26). Meanwhile, the regulator debarred IIFL Finance from disbursing fresh gold loans due to "material supervisory concerns".

Flexible repayment options

The primary appeal of these loans lies in their low interest rates as they are secured loans. Borrowers also do not need a good credit history. "Lenders are happy to lend even in the absence of a credit history due to the valuable nature of the collateral," says Adhil Shetty, chief executive officer, BankBazaar.

These loans also come with flexible repayment options. In conventional loans, borrowers pay a monthly EMI comprising principal and interest.

One type of gold loan allows the interest to be deducted upfront from the loan amount.

"If you borrow, say, ₹1 lakh for a year, and the interest amount is ₹10,000, you are lent ₹90,000. You only repay the principal through EMIS," says Shetty.

Some gold loans permit bullet payments: the borrower settles the principal and interest in a lump sum at the end of the tenure. In this example, they would pay ₹1,10,000.

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