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Factors That Affecting The Gold Loan Interest Rates

Every Indian household has some gold possessions in the form of jewellery, ornaments, coins, etc. 

According to the World Gold Council, Indian households have approximately 25,000 tonnes of gold.

It makes Indian households the world’s largest holders of the yellow metal.

Earlier, gold was used only for religious or ornamental purposes, but this has changed now.

People are using their gold jewellery and coins to get quick financing in the form of gold loans.

Gold loans are easy to get, and the borrower does not have to sell off his gold valuables to get funds. 

The gold loan interest rate is low compared to other kinds of loans. 

Factors Affecting The Gold Loan Interest Rates

The lender charges an interest rate on the loan amount borrowed. The gold loan interest rate is the primary deciding factor for the cost of the gold loan. Understanding the factors that affect the gold loan interest rate can help the borrower work towards getting a loan at lower interest rates. These factors are:

  • Principal Loan Amount: The principal loan amount is the amount of loan the borrower gets against his pledged gold. It is a percentage value of the pledged gold’s value. The higher the loan amount, the higher the interest rate. Therefore, the borrower should assess his financial requirement carefully before taking a loan to avoid paying unnecessarily high-interest rates.Muthoot FinCorp offers gold loans starting at only 11.99% interest per annum. The Loan to Value offered by Muthoot FinCorp is high and customers can get up to 75% of their pledged gold’s value as a loan.
  • Monthly Income: The eligibility requirements of a gold loan are much more lenient than other types of loans. Lenders do not ask for income proofs or income tax return statements from the loan applicants. They may check the income source and income level of the loan applicant to ensure that he or she can repay the EMIs on time.

    Borrowers who do not have too many financial obligations and have a higher income are more capable of repaying the loan. Such customers get cheaper interest rates on their gold loans. Customers with a low income will get a lower loan amount and a higher interest rate because the chances of default on payment for such customers are higher.

    Muthoot FinCorp does not require income proof from the customers, and anyone between the age of 18 and 65 can apply for a gold loan.

  • Methods of Benchmarking: Lenders use the MCLR linked lending rate and the Repo Rate Lending Rate benchmarking methods to calculate the gold loan interest rate. The type of benchmarking method used by the lender contributes to the interest rate for the customers.The interest rate will fluctuate every three months if it is tied to the Repo Rate Lending Rate and every six months if it is tied to the MCLR. Therefore, customers can benefit from knowing the benchmarking method used by their lenders.
  • CIBIL Score: The CIBIL score tells about the creditworthiness of an individual. If the borrower has a high CIBIL score, it means he has been regular with his past financial commitments. Such a person is less likely to default on his future loan repayments, and the lender offers him a loan at a lower interest rate.Muthoot FinCorp does not consider the credit score of the person while offering a gold loan. Thus, individuals with a low credit score or no credit history can also apply for a gold loan with Muthoot FinCorp. They can improve their credit score by repaying their gold loan in a disciplined way.
  • Place of Residence: The gold loan interest rate varies with the place of residence of the borrower as the interest rate is different for different cities. 
  • Gold Loan Scheme: Muthoot FinCorp offers gold loans under various gold loan schemes. These schemes have different interest rates, loan amounts, and loan tenure. The customer can choose the gold loan scheme as per his loan requirement. The interest rate on the gold loan will be applicable as per the gold loan scheme chosen by the customer. 

Customers can use the Muthoot Gold Loan Calculator to see the different interest rates and loan tenures under different gold loan schemes and make an informed decision while taking a gold loan. 


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