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Gold Loan Fees and Charges Explained: Complete Guide
Summary: Gold loans let you get quick funds by pledging jewellery, but they include charges like interest, processing fees, stamp duty, late payment, and auction costs. Some lenders offer low fees, no prepayment charges, and clear terms. Knowing all fees upfront helps you manage repayment smoothly and choose the right lender confidently during urgent financial needs.
When life throws unexpected challenges, such as medical emergencies, urgent home repairs, or sudden educational expenses, many people find comfort in the security their gold provides.
Taking a gold loan allows you to tap into the value of your jewelry without having to sell it, providing you with quick financial support when you need it most. However, before filling out the gold loan application, it is essential to note that gold loans are accompanied by their own set of charges.
Knowing the complete breakdown of costs can help you make an informed decision and avoid any surprises.
Join us as we discover the ins and outs of gold loan charges, helping you navigate the gold loan process with confidence.
Key Fees and Charges in Gold Loans
Several charges apply at various stages of the gold loan process. Each lender has its gold loan criteria, and some charges are applied upfront while others may come into play during the loan tenure or at loan closure.
Below is a clear explanation of all the fees and charges you should be aware of when taking a gold loan:
Interest Rate
The interest rate on a gold loan is a percentage of the loan amount that you need to pay to your lender for borrowing money against your gold. This rate varies across lenders and schemes.
It is important to note that reputable lenders, such as Manappuram Finance Limited, offer competitive rates, with base rates starting from only 9.90%
Processing Charge
A processing charge is a small loan fee that lenders take to handle the paperwork and administrative steps involved in giving you a gold loan. This fee is typically a one-time charge.
Renowned NBFCs, including Manappuram Finance Limited, impose a nominal gold loan processing fee of ₹25 plus tax on their gold loans. This charge is payable at the time of loan settlement, making gold loans a cost-effective choice for borrowers.
Foreclosure/Prepayment Charges
Foreclosure or prepayment charges are loan fees that some lenders may apply if you choose to repay your gold loan before the agreed tenure ends. While certain banks and financial institutions impose these charges as a penalty for early repayment, others do not.
For example, Manappuram Finance Limited does not charge any foreclosure or prepayment fees. This means that you are free to settle your loan whenever you want.
Late Payment Charges
Late payment charges are imposed when you fail to repay your gold loan on time. These charges serve as a penalty for late payments and vary across lenders.
Established lenders, such as Manappuram Finance Limited, apply a penal charge of 2% per annum on the outstanding loan amount after your loan tenure ends. It is applicable until you clear the dues.
Stamp Duty Charges
Stamp duty is a government fee applied to make your gold loan agreement legally valid. This charge depends on your state, as different lenders set their rates based on local rules.
For instance, Manappuram Finance Limited, an RBI-registered NBFC, collects stamp duty only for fresh pledges in Rajasthan and Karnataka.
- For loans in Rajasthan, the stamp duty is 0.25% of the loan amount plus any applicable surcharge.
- In Karnataka, if your gold loan amount is ₹1 lakh or more, the stamp duty is 0.5% of the loan amount.
Other Common Charges
- Auction Charges: Auction charges refer to the various expenses incurred at the gold auction, typically due to non-repayment of the loan. These loan fees include costs related to printing and stationery, advertising, transportation, insurance, postage, sorting, and listing your items for sale.
Gold loans from well-known financial institutions, like Manappuram Finance Limited, come with auction charges of ₹460 (including tax) per pledge.
- Account Statement Charges: These charges are applied when you request a physical/duplicate statement of your loan account. The exact amount varies depending on the timing of your request and the lender.
For example, Manappuram Finance Limited gives you your account statement free of charge if you request it within 30 days after closing your loan. If you need the statement after the 30-day window, a small fee of ₹25 applies.
Conclusion
Understanding gold loan charges is crucial for making informed decisions and effectively managing your loan.
By being aware of fees like interest rates, processing fees, stamp duty, late payment charges, auction costs, and more, you can avoid surprises and manage repayments smoothly.
Always choose a trusted lender like Manappuram Finance Limited, compare your options, and make timely repayments to keep costs low and maximise the benefits of your loan.
With the right knowledge and lender, gold loans can be a valuable financial tool in times of need.