CHARGES INVOLVED IN A GOLD LOAN

Acquiring loans from banks or NBFCs (Non-Banking Financial Companies) involves a systematic procedure. The bank conducts the procedure to check whether the applicant is eligible for the loan or not. The steps involved in this procedure are:

1. Assessing the application of the borrower.

2. Evaluating credit history.

3. Assessing the loan collateral.

4. Signing the loan agreement.

5. Monitoring compliance with the agreement and other customer service needs.

Now to carry on these steps, the institutions need manpower and time. The responsibility of complying with the procedure is mainly on the bank or NBFC. They have to do justice to the task and be fair to the borrower. For this, they bear the cost of conducting this entire process and later on recover the same from the borrower in the form of a processing fee and documentation fee ( if any). 

Along with the aforementioned charges, the institutions add Goods and Services Tax (GST) for any additional services provided by them. The banks and NBFCs also charge penal rates in case of delay or default in the payment of the Equated Monthly Instalments (EMI). Some banks and NBFCs do not charge any processing fee. In case the borrower wants to pay back the entire amount before the term ends, he/she has to pay a certain fee also known as the foreclosure fee.

Though the gold loan interest rate forms the major part of the charges to be paid, other charges cannot be ignored while weighing the options before applying for a gold loan.

Following are the charges that a borrower needs to pay under the HDFC gold loan policy-

• Interest Rate- Starting 9.90%

• Processing Fee-1.50% of the Principal Loan Amount

• Prepayment/Foreclosure Charges-2%+GST (Within 3 Months), 0 (After 3 months)

• Valuation Fee- Rs 250 for a loan up to Rs 1.5 lacs and Rs 500 for a loan over and above Rs 1.5 lacs

• Late Repayment Charges-2% p.a. + Applicable interest rate.

• Renewal Processing Fees- Rs 350 + GST

This is just an instance of what all charges are involved when a borrower has applied for and has been granted a gold loan.

Also read:- Busting Famous Gold Loan Myths