The State Bank of India (SBI) is one of the most popular gold loan providers in the country. The bank offers loan against gold to salaried, professionals, agriculturists, unemployed individuals, and women who want emergency funds or monetary support for personal or business purpose. SBI is known to charge the lowest interest rate on gold loans. The SBI gold loan interest rate starts between 10.15% and 10.25% and there are various factors that influence these rates.
Here are few important details about interest rate of SBI gold loans, which you must know.
- How to Calculate the Interest Rate of SBI Gold Loan?
10.25% is the lowest rate of interest. Several factors influence the interest rate of a loan against gold. These factors are loan tenure, amount, and loan needed as percent of gold jewellery’s value. Existing customers of the bank can expect better rate of interest.
- Loan to Value Ratio: RBI has fixed the maximum gold loan to value of jewellery ratio as 75%. But, the State Bank of India also provides loans at lower LTVs. Rate of interest on loans with lower loan to value, will be less compared to loans with greater LTV. 75 percent is the maximum LTV offered by the bank, as calculated on the gold’s net weight.
- Purpose of the Funds: SBI offers a loan against gold for agricultural needs at a concessional rate. It is accounted under the priority sector lending target by the bank. Thus, 1 to 2 percent concession is possible in standard interest rate for such a loan taken for agricultural purposes.
- Loan Amount: The bank offers loan between Rs. 20,000 and Rs. 20 lakhs. Amount lower than Rs. 20,000 can be approved in a few cases. The loan amount approved will depend on the jewellery weight. State Bank of India provides jewel loan per gram of gold. It may differ by the gold’s purity and loan to value ratio.
- Tenure: There is a possibility that a higher rate of interest will be charged for loans of a shorter tenure. In SBI, the tenure for a loan against gold is between 3 months and 36 months.
- Relationship with the State Bank: Existing account holders can be offered special rates, charges, and offers. However, a bad relationship with the bank (default at a past loan, cheque bounce etc), can cause loan rejection or charge of a higher interest rate.
- SBI Loan against Gold Charges and Fees
Other than interest rates, you must be aware of other charges applied on gold loan, as these will affect the overall cost of the loan.
- Fees to Process the Loan: The bank charges 0.50% of the loan amount as the processing fee for the loan. The minimum processing charge is fixed at Rs. 500.
- Foreclosure and Prepayment Charges: SBI allows gold loan prepayment and does not levy any foreclosure or prepayment charges.
- Repayment Schemes vs. Rate of Interest
The State Bank of India has several gold products and these come with different repayment options. The repayment plan will not affect the interest rate. However, it will help you manage your finances better and understand when you have to pay the interest and the principal amount.
- Bullet Repayment: Here, you can pay the complete principal amount at the end of the tenure. Thus, you will have lower monthly payments, which will comprise of only the interest component, reducing the loan burden significantly. This repayment option is preferred for gold loans with shorter tenures.
- EMI: You can also opt to pay regular EMIs, which contain the principal and interest component, every month till end of the tenure.
- Lump-sum Payment: There could be an offer to repay the loan in lump-sum at particular intervals.
The above-mentioned information will help you understand State Bank of India gold loan interest rate in detail, thus, study these factors carefully.