NBFCs or banks -

which is better

for getting a

gold loan?

Not sure if you should get a gold loan from a bank or an NBFC?
Make an informed decision with this comparison

Gold loans are sanctioned by both banks and Non-Banking Finance Companies (NBFCs). The eligibility criteria for the two may differ depending on the institution, but generally the borrower has to be:

• An Indian citizen • Aged between 18 and 75
• A self-employed or salaried employee

What do NBFCs offer?

Loans only against gold

Cannot offer loans worth more than 60% of the gold’s value

Maximum loan amount is Rs 1 crore

The annual rate of interest is 24-27% but for a few NBFCs (such as Muthoot Finance) it can be as low as 12% a year

Borrowers have the option to repay just the interest on a regular basis; they may pay the principal amount at the end of the tenure

Prepayment is allowed without penalty

Loan disbursal is almost instant

If the loan value is comparatively low, NBFCs sometimes disburse cash

What do banks offer?

Loans against gold jewellery as well as gold coins

Maximum loan amount offered is Rs 10-15 lakh

Comparatively low rate of
interest of 14-16%
a year (excluding
processing fee of 1-2%)

Both interest and the principal have to be repaid regularly

Prepayment involves a penalty

Takes 4-5 days for
disbursing the loan

The disbursement is almost always credited to your bank account

While deciding whether to take a gold loan from an NBFC or a bank, consider the primary purpose for availing of the loan. On that basis, and with the details mentioned above, you should find it easier to choose one that best fits your needs. Generally, it’s advisable to approach an NBFC if you’re looking for a short-term loan and a bank if you’re looking to borrow for more than 2-3 years.