Should You Take a Gold Loan from NBFCs or Banks?

Gold loans are a great way to manage emergencies where you need funds to pay. Through a gold loan, one can give their gold jewellery or coins as collateral and get money in exchange. This is most beneficial when there are financial emergencies and one needs to pay bills like the medical ones.

One can borrow a gold loan from banks, but there are also Non-Banking Financial Institutions (NBFCs) offering the same with certain variation in terms and features. To know which would be better for you – gold loan from a bank, or a gold loan from an NBFC, read further and know the differences.

Gold Loans from Banks

Getting a gold loan from a bank comes with the following points:

Vast Offline Network

Banks are usually spread across the country in the form of hundreds of branches in various locations. This allows you to easily visit the near-most branch and apply for a gold loan. It is much easier as you might not have to travel much and you can simply get funds against the gold items.

High-Level Security

There is another point of profit when borrowing gold loans from banks. Banks are known to keep very strict security measures. They are keen to keep the gold you submit in an extremely secured fashion with 24/7 surveillance. There are technological features like alarms and secure vaults to ensure the safety of all valuable. This ensures that the gold you borrowed stays safe and that you stay stress-free about its security.

Fund Usage

Banks do impose some restrictions on the ways you can use the funds you get against the gold. As per banks, it might be necessary to use the money borrowed for intentions like medical bill payment, education, business or marriage. The facility, no doubt, is a boon when you lack funds for any of these purposes.

Extra Charges

There are some charges imposed by banks when lending gold loans. These include valuation charges and processing fee. Talking of the valuation charges, the banks may charge these for their verification of the gold submitted. They need to check the purity and the value of the gold to ensure that the amount you are being lent equals the gold's worth.

Coming to the processing fee, this may be charged to cover for the administrative tasks that involved loan approval like document verification. When borrowing a gold loan from a bank, there are advantages to be enjoyed, though there can also be some strict regulations and restrictions making things a bit complex.

You may also like "Pros and Cons of taking Gold Loan in India"

Gold Loans from NBFCs

Here are the features attached to a gold loan from an NBFC:

Restrictions

In contrast to banks, NBFCs do not impose any restrictions on how you use the money you receive against the gold in a gold loan. When you have freedom to use the money, you can fulfil many of your financial requirements.

Amount of Disbursal

Many a times, we need a higher sum of money and try to get a gold loan for that. This is an advantage with NBFCs, which often agree to give you a higher disbursal amount, thereby letting you cover the expenses well enough.

Schemes

With NBFCs, there are a number of gold loan schemes in play. You can use them to make a more suitable choice for the loan. The schemes differ if rates of interest offered, repayment terms, etc. Based on your financial goal, you can choose a scheme that benefits you well.

Tenure

The tenure for which you are assigned the gold loan is also a matter of concern. Usually, we need a higher tenure to repay such an amount. With Non-Banking Financial Institutions, there are options to select from. You can choose a scheme that better caters to your schedule requirements and budget needs. Flexibility to make a choice in tenure options helps when you are not sure when you can fully repay the loan.

It is notable that there are certainly a greater number of benefits for the public when borrowing a gold loan from an NBFC rather than from a bank. However, that does not hold as a conclusion when comparing banks and NBFCs for gold loans.

So, What Can Be Concluded?

There are pros and cons to both banks and NBFCs when you need a gold loan. With banks, there is more security, they're more conventional and trustworthy, and also have wide branch network. With NBFCs, greater flexibility is attached with tenures and interest rates, there are options in schemes, lesser restrictions, etc.

The best decision is the one that suits your needs. This is because sometimes a gold loan from a bank may suit you more, while that from an NBFC may be more appropriate at other time. Hence, it is suggested that you study the various factors concerned to understand the more beneficial option and go for it.

Recent article "What Happens If You Don't Repay Your Gold Loan?"

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