What You Should Know About GST on Gold Loan Interest?
India ranks 3rd in gold reserves in Asia and 9th in global gold reserves.
In a country like India, where investment in gold is a preferred means of investment, gold loans are a popular option to arrange funds for financial emergencies.
Gold loans are readily available at easy terms of repayment.
Customers can pledge their gold possessions and take a loan against them for up to 75% value of their gold.
Apart from the usual documentation and eligibility requirements, there are other aspects of the gold loan that a borrower should be aware of.
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Gold Loan Interest Rate
Like every other loan, the gold loan is also available to the borrower for a pre-decided interest rate. However, the gold loan interest rate is much lower as compared to other loans like personal loans because of its secured nature.
With Muthoot FinCorp, gold loans start as low as 11.99% per annum under various gold loan schemes.
Customers can pay back the loan and interest amount through the easy repayment options offered by the lender.
Muthoot FinCorp facilitates loan repayment for customers by offering them the option to pay in convenient EMIs or bullet payments.
Customers can calculate the EMI payable for different loan amounts and loan tenures using the gold loan EMI calculator given on the lenders’ websites.
Calculation of Gold Loan Interest Rate
The lenders calculate the interest rates on gold loans based on the loan amount requirements and regions of the borrowers.
Muthoot FinCorp uses the simple interest method to calculate the interest applicable on a gold loan.
Customers can use the gold loan EMI calculator on Muthoot FinCorp’s website to calculate the loan amount they can get against their gold.
The calculator also gives an idea of the applicable interest rates and the number of EMIs the customer would have to pay for the given loan amount.
Factors affecting Gold Loan Interest Rate
There are a few factors that affect the gold loan interest rate. These are:
- Amount of loan: The loan amount is the most crucial deciding factor for the gold loan interest rate. The higher the loan amount, the higher the interest rate. The loan amount a customer can get depends on the value of the gold he pledges as collateral. Muthoot FinCorp offers a loan of up to 75% value of the pledged gold as collateral.
- Gold Loan Scheme: The gold loan interest rate also depends on the scheme under which the gold loan is offered. Muthoot FinCorp offers loans under various gold loan schemes to fulfil the customers’ requirements. These schemes have different interest rates, loan amounts, and loan tenure options. The customer can choose the combination that suits his requirements best.
GST on Gold Loan Interest
Goods and Services Tax (GST) is charged extra, over the basic charges, on all gold loan charges, wherever applicable.
GST on gold loans is chargeable at 18% but is not charged on the interest rate. It is charged on the processing fees of the gold loan.
With Muthoot FinCorp, processing fees for gold loans start at only Rs. 20, including GST charges under different gold loan schemes.
Standard Gold Loan Fees
- Gold Loan Processing Fee: All loans, including a gold loan, come with a processing fee. The lender charges the processing fee over the interest charges. Processing fees can significantly affect the cost of a loan. Muthoot FinCorp charges a nominal processing fee between Rs. 20-0.25% on different gold loan schemes.
- Valuation fee: Some lenders charge a valuation fee while valuing the gold of the customer he wants to pledge against the loan. Muthoot FinCorp does not charge any valuation fee from the customer and does the valuation for free.
- Foreclosure charges: Lenders charge foreclosure charges from borrowers who want to repay the loan before the end of the loan tenure to cover the lost interest revenue due to the early closing of the loan. Muthoot FinCorp charges zero foreclosure charges after three months of sanctioning the loan to the borrower.
The interest rate for the gold loan affects the EMI a customer has to pay every month. The gold loan EMI calculator helps find out the loan amount, applicable interest rate, and the number of installments the customer has to pay. Muthoot FinCorp does not charge any fees or charges apart from the interest rate and processing fees on gold loans.
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