Gold Loans Offer You A Golden Opportunity By Adhil Shetty

Gold has always held its value all over the world, even in troubled financial times. In India, gold assumes huge significance because it's considered to be the most treasured saving of every household. Moreover huge emotional and sentimental value is attached to the gold you own, which is why many of us are against the idea of applying for gold loans. However these loans offer you a brilliant opportunity to get yourself out of sticky situations and it's rather unfortunate that many Indians don't make the most of this option available to them.

Gold Loans: Why should you opt for them?

These loans make perfect sense because they are your gateway to instant hard cash. If you have an urgent financial commitment, have to raise funds for your business or any personal reason, these loans are ideal for you. Here are some of the reasons why you should look into them carefully:

* The value of gold can be estimated instantly unlike other security loans. Thus you get the loan amount instantly.
* Many co-operative banks and several other banks give you these loans even if you don't have an account with them. A copy of your ration card is all that's needed.
* There are many financial institutions and lenders who will offer you loans on your gold.
* Depending on the market rate of gold and different bank policies, you can get loan on gold for up to Rs. 20, 00,000, which can tide you over many difficult situations.
* Salary recipients don't get any tax exemption on these loans but business owners can show expense on interest in their expenses to get tax benefits.

Gold Loans: Things you should remember

While it's true that you get cash against your gold almost instantly, you will have to pay a processing fee of about 0.56%. It's just one of the few things you will need to consider before applying for these loans:

* Your gold can be kept in a bank for only a certain period of time. However you can redeem and mortgage it the next day itself.
* If you don't pay any interest or principal amount on the loan, then after a certain period of time, usually three years, your gold can be brought for auction. The time period varies from one bank to another.
* Interest rates for these loans tend to be high with many banks. Other financial institutions hike up the interest rate after an initial period of three months.

Hence if you need to get a loan against gold, you will need to carefully look into the terms and conditions of banks and financial institutions before applying for these loans. Individual lenders should be your last option.

Gold Loans: What do different banks charge?

Industrial Credit and Investment Corporation of India Bank (ICICI Bank) charges an interest rate of 14-15% on these loans, while State Bank Of India (SBI) charges between 13.75 to 14.25%. International Netherlands Group Vysya Bank (ING Vysya Bank) has a lower interest rate at 12-13%, while Canara Bank and The Tamil Nadu State Apex Co-Operative Bank (TNSC Bank) charge a flat 14% interest rate for these loans.

Besides interest rates, you will also need to think about processing fees and other factors, when you apply for Gold Loans, which can give you a helping hand in tricky financial times.

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