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| November 24, 2021

GST on Gold Loan Interest – Here’s What You Should Know

Taking a loan is among the popular ways of addressing financial emergencies. There are various forms of loan like a personal loan or redeeming the investments in financial instruments like provident fund, mutual funds, etc. that can be opted for. Besides, one can also take a gold loan, especially in a country like India that has a vast market of investment in gold.

Gold is akin to being Lakshmi in India, meaning that people buy gold on almost every occasion to welcome luck and prosperity in their homes. Besides, there are people who buy gold to enhance and strengthen their investment portfolio. All this has made gold loan popular among the people of the country as it is readily available and can be utilized in the case of emergency.

While we all are aware of the simple norms of taking a loan against gold, there are other facts that one should pay attention to ensure a worthwhile investment. Keep reading to learn more about various aspects of taking a gold loan like interest rate, GST and more.

Interest Rate on Gold Loan

Gold loan has two components - principal and interest, and both of them are considered when calculating the EMI for repayment. At the time of repayment, a gold loan is considered fully paid only when both the components have been paid off.

Interest rate on gold loans is a fluctuating component and is different in terms of offering at various financial institutions and non-banking financial services. Hence, it is advisable to compare different offers before finalizing the deal.

Or else, opt for financial services like Muthoot that offer its customers a wide portfolio of gold loan schemes with different rates of interest. They are known to offer low interest rates on gold loans in comparison to the market rate.

Gold Loan Interest Rate And GST

Interest rate on gold loans is charged on the basis of various factors like repayment period, mortgaged amount, gold amount and quantity and more. This is compounded with GST on gold loans, but not included directly in the interest rate. It is generally charged on the processing fee for gold loans.

The most important thing to note here is that selecting a good financial service provider can help you bag a gold loan at a low rate of interest and nominal GST charges. Additionally, some of them also have an easy loan process with quick disbursement and little to no additional charges.

Calculating Interest Rate on Gold Loan

Gold is preferred because of its easy process, flexible EMI, low interest rate and minimal processing charges. But do you know how to calculate the interest rate on a gold loan?

Financial service providers like Muthoot Finance offer online tools to help navigate the process of availing a gold loan for the ease of borrowers. One of these tools is the gold loan EMI calculator. People interested in taking a gold loan can leverage the tool to know their loan eligibility and applicable EMIs along with the interest of the gold loans.

All you need to do is enter details such as email id, contact number, type of gold, the amount required as loan, and a few other details for the tool to help you get the right information. However, it may be noted that the tool works on algorithms and provides approximate values against the details provided. To be able to get the exact details, you need to get in touch with the representative of the service provider and let the professionals help you.

Factors Affecting Gold Loan Interest Rate

There are a couple of factors that can affect the interest rate levied on gold loans. These include,

  • Loan amount

    One of the crucial factors that play a key role in calculating the interest rate on gold loans is the loan amount. The loan amount depends on the overall gold value pledged by you. Since the gold prices are at an all-time high, you could get a higher loan amount with the interest rate calculated as per the said percentage.

  • Paying capacity

    Gold loans are secured loan and several people prefer it due to the quick disbursal and flexible monthly payments. However, lenders do check the paying capacity of the borrower to decide the interest rate. High paying capacity equals a low rate of interest and vice versa.

  • Credit score

    Lastly, the credit score of the borrower helps the lender decide if the interest rate is to be kept high or low. A good credit score means that the borrower has made regular payments of the EMIs against the loans previously taken, thereby increasing the trust factor due to the high creditworthiness.

To conclude,

The interest rate on the gold loan depends upon the type of loan scheme availed and its tenure. The GST on gold loans is charged on the processing charges and not on the interest rate.

Understanding the nittiy gritty of a gold loan and its various aspects is crucial because it directly affects the EMI of your loan. Furthermore, having a low interest rate on your gold loan can reduce your repayment cost to a great extent.

People trust brands like Muthoot Finance when seeking loans against gold. Muthoot Finance gold loan rate of interest and exceptional customer service have made its loan against gold scheme a deciding factor for its customers.

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