Gold Loan

Kerala’s love affair with gold

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Kerala-love-gold

Kerala is well-known for its fascination with gold and gold jewelry. In the 1970s, till 2000s whenever Keralites traveled to Gulf countries they returned with large quantities of gold. Those days there were many restrictions on the import of gold and this is the reason that Malayalees bought gold when they went abroad. However, nowadays the restrictions on gold import are more relaxed and the yellow metal is more easily available within the country. Most Indians, including Malayalees, do not consider gold to be for mere ornamentation instead gold is considered a good form of investment. However, if you are considering buying gold for investment then you should consider the gold rate in Kerala at the time of buying.

Where Should you Buy Gold in Kerala?

There are a number of jewelry shops spread across the length and breadth of this South Indian state. All the major cities including Cochin, Thiruvananthapuram and Calicut have a large number of jewelry shops. Even the smaller towns are not far behind in their love for gold and you can find all sizes of shops in the smaller towns as well. The more popular shops include Malabar Gold, Gold Alukkas, Joy Alukkas etc. In fact, gold buyers are literally spoilt for choice when it comes to gold shops in this state. It is a good idea to visit some of the most popular shops in the city that you are in and then engage in some window shopping while you decide the particular shop that you wish to buy from. Make sure that this shop provides some kind of certification like BIS and Hallmark. Otherwise there are many traditional shops in each city which have been passed down from one generation to another and they are equally reliable.

What to check when buying gold in Kerala?

Before you set out to buy gold in this state, you should always check the price. Although the rates of gold will be more or less the same across the state and cities, labor charges are the real catch. Some shops charge more for the making of the ornaments, but this does not matter if you are buying gold bars or biscuits or coins. However, if you are buying ornaments then it is advisable to check the making price of different shops. At the same time, as mentioned above, you should check for purity and wherever possible only opt for hallmarked jewelry.

How gold prices are determined in Kerala?

Gold rate in Kerala largely depends on the international price of gold. Hence if the price of gold rises in the international market, it will rise in Kerala as well and vice versa. If we consider the last few years, the year 2016 has been a good year for people wanting to invest in gold in Kerala and they have got significant returns. In fact, if people in this state sell the gold bought last year in this year then they stand to gain almost 20%. If you are looking for steady returns then gold is a good investment along with being a good diversification saving instrument.

Take into consideration taxation of gold in Kerala

You definitely need to bear in mind that gold in Kerala or elsewhere in the country will be taxed. If you sell gold after three years, there will be a 20% tax with indexation. This means that if the indexation works out to be 10% over two years, your tax rate on the gold that you sell will only be 10%. If you sell gold before three years, you will be taxed according to your tax slab. Hence you will end up paying 10, 20 or 30 percent depending on your tax slab. The higher is the tax slab, the more will be the tax rate on your gold.

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Why Gold Loan is better than personal loan?

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There are some requirements which can only be filled with the help of money and there is no specific loan for the same. If you have a medical emergency in your family or you have to manage some requirements of your home, you have to depend on personal loans. The loan can sponsor a trip or some business requirement. It can also be taken when you have some extra money requirement to run your family for some time. Just few years back, personal loan was the only way out to finance your special requirements but today you can also depend on gold loan. There is always a dilemma when choosing between the two.

gold-loan-vs-personal-loan

Which loan is better to take?

  • For gold loan, you need to have gold of good quality and that would be able to finance your requirements. This is very important to apply for gold loan because this cannot be processed without a security. However, for personal loan any such security is not required. However, the gold loan interest rate is lower than the personal loan, so your monthly expenditure on the interest will also be lower for gold loan. You don’t want to pay extra on loan because this will not yield any benefit what so ever.
  • Gold loan application does not have eligibility criteria. If you have gold, you can apply for the loan and your amount will be approved based on the value of the loan and not your eligibility. Yes, every bank has a limit to the amount they can approve the loan for and that is how the loan amount is processed and approved. For personal loan, your income criteria are also quite important and everyone is not eligible for such a loan.
  • The requirement of documentation is quite less in case of gold loan. You have to submit the gold and declare that the gold belongs to you. You will also need to present your pan card and bank details so that the money can be transferred. Your address will be verified by the bank in order to approve the loan. In case of personal loan, you need more documents, like your bank statement and income proof. Everyone is not provided the loan because they may not meet the eligibility criteria.
  • The gold loan is processed within the shortest possible time because there is no hassle of income verification. On the other hand, you have to apply for the personal loan and wait for the approval from the bank’s side. The gold loan is even processed within an hour if the gold is in proper condition. So, if your gold can be verified, the loan will be approved without much delay. In case of any urgent requirement, gold loan is the fastest and ultimate option to trust.
  • When you have taken advance from the bank against the gold, you will have the urge to pay it back in time. You will not miss the EMI for any month and there will not be much penalty. In personal loan, there is no mortgage. So, it is possible to miss the EMI and it may pile up to make the condition even worse.

There are so many conditions where you will require money to finance some needs on a urgent basis. You may not be eligible for a personal loan depending on the credit score or the previous loans you have taken. In all those cases, you can apply for a gold loan with the gold asset in your home. This is also given to the housewives who don’t have a proper source of income. That is why it is better to take gold loan than personal loan.

Which is better: Gold Loan or Personal Loan?

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Loans are an easy way to fulfill financial liabilities such as your child’s education, their marriage, your much-anticipated vacation and a lot more. However, the banks have segregated the concept of loaning into various types. There are personal loans that you can use to fulfill your personal requirements or monitory contingencies. Moving on to the next loan categories, there are car loans and a home loan that allow one to buy a car and a home respectively without worrying about the expense. Gold loan is yet another significant concept that allows you to get instant money in exchange for your precious gold.

Personal Loan or Gold Loan

If you are planning to get a loan to fulfill your personal liabilities but are perplexed about which loan scheme to choose, it is advised to choose either a gold loan or a personal Loan. Both can be used to fulfill urgent financial needs but there are certain pros and cons of both that you need to know before filling up the loan application.

What is a personal loan?

A personal loan is one of many types of loans that can be borrowed from banks. It can be used to pay the consolidated debt, house renovation or any other unexpected expenditure. Personal loans are more difficult to get and have strict eligible requirements. To get a personal loan, you must know that:-

  1. Personal loan is unsecured loans
  2. A personal loan has fixed loan amount. The better your credit score and higher your income, the more money you can borrow
  3. The personal loan usually has fixed interest rates based on your credit score. The better your credit score, the lesser interest rate you’ll have to pay and vice versa
  4. A personal loan may affect your credit score. Therefore paying personal loan EMIs on time is the best way to keep your credit score unaffected

What is Gold loan?

As you might understand from the name, Gold loan is given against the gold. Many private and national banks, as well as other lending firms, offer this loan at attractively low interest rates. Many people get this loan for short term requirements to meet the needs of their children’s education, business expansion, child’s marriage and other emergency expenditures. Popular options include HDFC, Manappuram, Muthoot and SBI Gold Loan. Some key features of Gold loan include:-

  1. The gold loan does not require any other collateral except Gold. This makes easier for self-employed and unemployed people to get this loan.
  2. The gold loan involves no/less paperwork. Just an ID proof along with address proof is enough to get this loan.
  3. The gold loan has lower rate of interest (generally 12-16% per annum). It is far lesser than a personal loan that charges 15-26% interest rate per annum.
  4. The borrower gets the option of only paying interest during the loan tenure and at the end of the loan tenure, you have the option of paying off the remaining loan amount due in a single shot.
  5. Gold loan processing time is much shorter than other borrowing options.
  6. In rural areas Agricultural loan against gold is also available for agriculturist at very low rate of interest (7%-8%). However one needs to provide a proof of agricultural document to get the loan.

Gold loan vs. personal loan: Which is better?

Ideally, Gold loan is better than the personal loan as it offers faster processing, minimal documentation, zero pre-payment fees, and no EMI option. So now if you have a good amount of gold hoarded in your locker and you have immediate requirement of cash for your personal needs, it is good to make use of the gold instead of choosing personal loan option on higher interest rates.

Top 3 Cities Having High Demand Of Gold Loan

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Gold – the yellow metal, the metal favored by women and men alike. For women, it has ornamental value while for men it has an investment value as gold is always found to appreciate in value over time. If numbers are to be believed, India’s gold imports have shown an increasing trend over the years because consumers are continuing their romance with this favored metal. To cash in on this romance, banks and financial institutions are offering gold loans against the pledge of gold ornaments owned by individuals. These loans are easy to avail, cheap and less risky (from the lender’s perspective) and are highly favored by both borrowers and lenders. The popularity of gold loans is reflected in their CAGR which shows that the Compounded Annual Growth Rate of Gold Loans outstanding from 2008 to 2012 was 57.5% for banks and 98.5% for Non-Banking Financial Corporations (NBFCs).

Gold Loan Share

In short, gold loan is becoming an increasingly favorable borrowing option for many individuals. When it comes to geographical distributions, South Indian leads the race with an annual gold loan demand of 40% followed by West India at 25%, then by North India in the range of 20% to 25% and the race completes with East India with only a 10% to 15% demand of gold loan. Bangalore, Ahmedabad and Mumbai are the top 3 cities which have the highest demand for Gold Loans as people have no qualms in obtaining this easy source of finance. With all the brouhaha over gold loan, here are some reasons why gold loans are a current favorite of many borrowers:

  • Low rate of interest – one of the primary reasons of availing this loan is because the loan promises a lower rate of interest compared to other personal loans which are unsecured and thus, have a higher interest incidence.
  • Easy availability – unsecured personal loans are issued after checking the creditworthiness of the applicant and usually require thorough checking on the lender’s part and waiting on the borrower’s part. Gold loans are sanctioned against the security of gold ornaments and are thus easily available
  • Utilization of assets – your gold ornaments, though assets, remain sitting in your lockers because of lack of any apparent use. A loan against these assets, thus, sounds practical as you can avail money on your ornaments for meeting your personal or business related expenses without having to sell your ornaments off.
  • Easy procedure – since the loan is issued against gold assets, the requirement of documents is reduced and the loan processing procedure becomes shorter. This entails easy availability of finances through an easy application and sanction process
  • Flexible – many lenders provide for an overdraft facility wherein the interest is charged only on the borrowed amount. There is also the prepayment facility extended by other lenders where the loan can be prepaid anytime without additional charges while some lenders insist only on the interest payments during the loan tenure. Thus, a gold loan comes with flexible features which are suitable for borrowers.
  • Beneficial for lenders – since lenders obtain the security of the gold ornaments, they do not have any default risk of non-repayment of the loan. The loan is issued based on the value of the gold pledged with the lenders and as such, the applicant’s income capacity and financial position does not indicate the repayment potential. Thus, lenders are risk-free when it comes to obtaining the repayment of their loans granted.

With so many benefits, no doubt the gold loan sector recorded such a high Compounded Annual Growth Rate (CAGR). Borrowers in Bangalore, Mumbai and Ahmedabad have contributed prominently to the gold loan growth rate story. Gold loan is issued based on the prevailing price of gold and the current price per 10 gram of gold on the date of writing this article in these top 3 cities is as follows:

Purity of Gold

Bangalore Ahmedabad

Mumbai

24 Karat Gold

Rs.29,946 Rs.31,650 Rs.31,540
22 Karat Gold Rs.28,000 Rs.29,600

Rs.29,490

The prices fluctuate every day and as is evident above, is region-specific. The purity of the gold pledged, the current prevailing price of gold and the total quantity of gold pledged are the factors which determine the amount of loan available to the borrower. So, India is taking leaps and bounds in securing a gold loan, how about you?

Benefits of SBI and Muthoot Gold Loan

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SBI vs Muthoot Gold Loan
SBI vs Muthoot Gold Loan

Gold loan, as the name implies, is a loan that is offered by banks to the consumers against their pledging of gold ornaments like gold ornaments, gold coins etc.Gold loan is offered by all types of nationalized banks, private banks as well as other financial companies at very competitive rate of interest. They are generally used to carry out all the basic household requirements of the consumers like children’s education, marriage etc. Presently there are many financial companies offering these gold loans at attractive interest rates. Let us have a look at the top 5 leading companies offering gold loans:

  1. Muthoot Finance Gold Loan
  2. Mannappuram Finance Gold Loan
  3. Union Gold Loan
  4. HDFC Gold Loan
  5. SBI Gold Loan

Muthoot is the leader in the Gold Loan race while SBI also gains the number 5 spot in our list. Since these two are among the top players, it necessitates knowing the reason why. The Gold Loans promised by them must have some benefits which ensure the leading spots. So, let us delve into the Gold Loans of Muthoot Finance, a Non-Banking Financial Corporation and SBI, a leading public-sector bank.

Muthoot Finance Gold Loan

Muthoot Finance is one of the leading and largest gold loan providers not only in India but also globally. They have been taking into account all the gold loan needs of the customers at very competitive interest rates for the past 129 years. Let us have a look at the features of Muthoot Finance Gold Loan:

  • The loan is distributed as quickly as within 5 minutes.
  • The customers can enjoy the loan at an amount as low as Rs.1500.
  • The loan amount has no maximum limit.
  • It offers prepayment of loan option to the applicants without any charge.
  • Simple loan application process involving minimal documents.
  • The gold, against which the loan is taken, can be valued in the safety of the house of the applicant.
  • Quick loan disbursal process increases customer relations
  • The gold ornaments of the applicants are stored in a safe environment.

SBI Gold Loan

State Bank of India is also one of the leading gold loan providers in the country. They offer loan to the applicants in exchange of gold items like gold ornaments, gold coins etc. at very competitive interest rates. Let us have a look at the features of SBI Gold Loan:

  • Simple loan offering procedure.
  • Comparatively less paperwork required.
  • Minimum loan amount is Rs.20,000 and maximum loan amount is Rs.20 lacs.
  • Any person with a fixed monthly income like pensioners, bank employees can take up this loan.
  • Lower interest rate on the loan granted
  • Gold loan is offered to anyone above the age of 21 years.
  • It accepts security of gold ornaments like gold coins, gold jewellery etc.
  • Nominal loan processing fees is levied.

The above were the benefits of Gold Loans from each institution and the following table provides a comparative analysis of both the loans for a bird’s-eye view.

Points of analysis Muthoot Finance Gold Loan SBI Gold Loan
Loan variants The company offers gold loans in 8 different type of variants Only one type of Gold Loan is available with the bank
Rate of interest Interest rate ranges between 14% to 24% Interest rate remains constant at 11.20%
Minimum loan Minimum loan amount is Rs.1500 Minimum loan amount is Rs.20,000
Maximum loan No maximum loan amount limit Maximum loan amount is Rs.20 lacs.
Repayment tenure The loan can be repaid within 7 days or within a maximum of 12 months Repayment period of 30 months or 36 months is available depending on the nature of the loan
Evaluation of Gold In-house evaluation of gold possible. No in-house gold evaluation done.

Now you know why these two Gold Loans are placed in the leading spots. Gold is not bought on a daily basis so why not do a detailed study beforehand and then opt for the best gold loan plan that would suit the needs and requirements of the applicants? The benefits of the leading plans are discussed above and you can make an informed decision. So now, secure your gold in the best possible hands and enjoy the benefits of the loan which is easily available, has lower interest rate and can be put to multiple uses.