How to Calculate Gold Loan Interest using Muthoot Gold Loan Calculator

In India, the practice of using gold ornaments as collateral to avail loans has been prevalent for ages. During old times, people would pledge some gold items (coins, bars, jewellery, etc.) with the lender as security when borrowing money. In today’s time, the process is somewhat similar, but the types of lenders have changed. There are a number of banks and NBFCs that have created an organized structure for this age-old practice of pledging gold to obtain funds. These financial entities offer loans up to a certain value of the gold items, the borrower pays interest on the loan availed and receives his/her gold assets back when the entire loan amount is repaid. It helps individuals use their idle gold assets and get over any temporary financial crisis.

Unlike other common types of loans, such as a home loan or car loan, where the funds can only be used for specific purposes, a gold loan comes with complete flexibility on fund usage. In almost everyone’s life, there can be times when funds are required for unplanned expenses at short notice. The reason could be anything, such as medical emergencies, education-related expenses, etc. In such situations, gold loans are one of the best options to obtain funds with no restrictions on the end use. In addition to this, interest rates on gold loans are comparatively lower than those on other types of loans. This also makes it a preferable option for customers as compared to other financing options.

Suggested Read: How To Secure A Gold Loan For Medical Emergencies And Other Needs

Here are a few other common reasons behind the increasing popularity of gold loans among customers:

Simplified Application Process: The application process for obtaining a gold loan is very simple and requires minimal documentation.

Quick Disbursal: Since a gold loan is a type of secured loan where gold ornaments are used as collateral, loan disbursal does not take more than a few hours. This makes a gold loan a preferable option for urgent cash requirements.

No Credit Score Required: Unlike other loan options where a good credit score is required to become eligible, gold loans have no such compulsion.

Security of Pledged Assets: While availing a gold loan, the applicant can be assured about the safety of gold items that are being pledged. Lending institutions (banks and NBFCs) use a secure vault to store the ornaments.

Now that you have a fair idea about why this is one of the easiest ways to arrange funds, let’s discuss how the interest rate on a gold loan gets calculated: