When it comes to gold loans in India, borrowers can choose between banks and NBFCs (Non-Banking Financial Companies). Both provide loans against pledged gold, but there are significant differences that can affect your interest rate, processing time, and overall borrowing experience.
1. Interest Rates
Banks generally offer lower interest rates compared to NBFCs. Rates can range from 7% to 12% per annum for banks, whereas NBFCs may charge 8% to 20%, depending on the loan amount, tenure, and borrower profile.
2. Processing Time
NBFCs are known for faster loan processing, sometimes disbursing funds within a few hours. Banks may take longer due to additional verifications and documentation requirements.
3. Loan Amount Eligibility
Banks often have stricter eligibility criteria and may approve loans based on account history or income proof. NBFCs primarily focus on the value and purity of gold, making them more accessible to borrowers with poor credit or informal income sources.
4. Repayment Options
Both banks and NBFCs offer flexible repayment options like EMI, bullet repayment, or part payment. However, NBFCs often provide more customized repayment plans suitable for short-term financial needs.
5. Documentation Requirements
Banks require KYC documents, proof of income, and bank statements. NBFCs usually ask for minimal documentation, making the process quicker and easier.
6. Customer Safety and Trust
Banks are regulated by the RBI and usually provide high-security vaults for storing pledged gold. NBFCs are also regulated but may vary in terms of security and customer protection policies. Always check the lender’s reputation and insurance policies before pledging gold.
7. Additional Charges
Banks often have lower processing fees but stricter late payment policies. NBFCs may charge higher processing fees but provide faster approvals and flexible tenure extensions.