The State Bank of India is one of the popular banks in India that provides a Loan against gold. Depending on the customers, their needs, and purposes of the credit, the interest rates may differ. The standard rate of interest ranges between 10.25% and 11.75%, but it can fluctuate as per the current rate of interest and several other factors. The SBI gold loan interest rate and gold loan scheme information, along with what is essential to apply for the loan, are all compiled and mentioned below.
Table of Content
- Types of SBI Gold Loan and Interest Rates
- Application Process for a Loan against Gold
- How to Calculate the Interest Rate of SBI Gold Loan?
- Repayment Options
- Charges and Fees
- Documents Required
1. Types of SBI Gold Loan and Interest Rates
Below given is information on gold loan SBI and its interest rate.
- Gold Loan Schemes: The State Bank gives loans against gold to anyone who is above 18 years of age. Employment and income proof is not a constraint. The applicant does not have to submit a salary slip, income tax proof etc. Women customers can get more concession on interest rates if the loan is used for business purpose. Similarly, farmers and agriculturist can get a concessional rate of interest on the gold loan.
- Agriculturists have to provide proof of farming activity and evidence of ownership for the agricultural land. The end use of the loan must be mentioned by the borrower. In all the cases, the gold pledged has to be kept with the bank, and this is returned after the loan is wholly repaid along with the interest and principal component.
- Interest Rates: There are two types of interest rates, fixed and floating. In most of the long-term loans, primarily secured, a floating rate may be charged. In such cases, the rates may change as per the directives of the RBI or the bank. However, when it comes to a loan against gold, the fixed interest rate is charged, as the loan, though secured, is of a short-term. Here, the rates do not change over time but remain the same.
2. Application Process for a Loan against GoldYou can apply for State Bank of India gold loan at the branch office. The customer representative will provide you with the application form and explain all the essentials. You have to fill and sign it before submitting it to the bank, with necessary documents. After the application is approved, the gold to be pledged would be evaluated. You will be told the exact loan amount that can be provided.
Once there is an agreement, and the loan process completes, the amount will be disbursed to your bank account. You can also apply for a gold loan online at the bank’s website as well. You will, however, have to visit the bank for gold evaluation.
3. How to Calculate the Interest Rate of SBI Gold Loan?The bank’s lowest rate of interest for a gold loan is 10.25%. Several factors influenced this rate and used to calculate the exact interest rate to be applied on loan. The existing account holders of State Bank may receive some concession in the rates against other customers.
- Relationship with SBI: Special rates and charges could be offered to the existing customers of SBI. Those who had made past payments on time may get the benefit of a lower interest rate than the standard.
- Loan Tenure: Lower tenure may apply a higher interest rate and vice-versa. At SBI, the maximum term for a gold loan is 36 months. The minimum mandate is 3 months.
- Loan Amount: The gold loan amount depends on the jewellery’s weight that you pledge with the State Bank. Usually, SBI will offer a loan per gram of gold. But the amount will also depend on the purity of the metal and the loan to value ratio (LTV). Lower rates may apply for loans of higher amounts. You can borrow between Rs. 20,000 and Rs. 20 lakhs.
- Loan to Value Ratio: Banks usually offer up to 75 per cent of the gold ornament’s current value. This amount is calculated leaving out the tax or service charges taken when the decorations were first purchased. SBI may offer funds at lower LTV than 75% as well. The interest rate on funds with lower LTV will be lower than loans of higher LTV.
- Purpose of the Funds: The State Bank of India offers gold loans for several different purposes, including agriculture. Agricultural loans come at concessional rates, as these loans are among the priority sector lending targets by the bank. The interest rate is lowered by 1 to 2 per cent than that charged to regular customers.
4. Repayment OptionsThe State Bank of India offers various types of gold loan schemes to meet your financial requirements. Each project may have a particular interest rate and repayment option, as mentioned below.
- Standard EMI: In regular EMI scheme, you need to repay a part of loan amount every month. Equated monthly instalments of this type comprise both of interest and principal components. By the end of loan tenure, you will be done with the complete repayment.
- Bullet Repayment: Here, you can pay the total principal amount at the end of the loan’s tenure. Thus, your monthly payments would be lower, since those will comprise only the interest component, reducing the loan burden significantly. Such repayment option is more common for a short-term loan against gold.
5. Charges and FeesOther than interest rates, the bank may also apply some charges when offering a loan against gold.
- Foreclosure or Prepayment: SBI permits prepayment of the gold loan, but does not apply any charges for the same.
- Processing Fees: A minimum of 0.5% of the loan amount is taken as a processing fee, or the lowest amount is Rs. 500.
6. Documents RequiredThe documents needed for a loan against gold at the bank is kept to a minimum. You can submit one proof of address and identity. For identity proof, PAN card is necessary, but you can also present Passport, Driving License, Aadhar Card, or Voter’s ID Card. For address proof, you can submit rent agreement, bank statement, utility bill, Aadhar Card, or Voter ID card. You will also have to provide 2-3 recent passport-size photographs of yourself.
Above-given information will help you understand the different rate of interests on gold loan by the SBI, and what factors influence the same.