Muthoot Finance Limited and SBI are two financial institutions that offer gold loans in India. They face a tough competition against each other, as both are proficient and have a large following among borrowers. The interest rate, offerings, schemes, also differs. A parallel comparison between Muthoot gold loan rates and SBI interest rates, will help one get an idea as to which loan scheme is the right option for his/her requirement.
The gold loan interest rate by Muthoot Finance is 12% per annum, while State Bank of India charges 10.25% to 11.05% onwards. Though there is a slight difference between these rates, the NBFC and bank have a high reputation, which is not restricted to interest rates alone. There are many conditions that affect the gold loan interest rate, some of which are explained in detail in the following post.
What Influences the Gold Loan Interest Rates By Muthoot and SBI?
Both the financial institutions offer a discount on interest rate to agriculturists, farmers, women, and existing customers. Not every bank and NBFC charges same interest rate and fees on jewel loan, but most of rates are influenced by similar factors, which are listed below.
- Loan against Gold Purpose: Like other providers, State Bank of India and Muthoot Finance allow borrowers to utilize the fund for personal and business purpose. The fund cannot be utilized for illegal and speculative purposes. When it comes to interest rates, the financial institutions offer 1 to 2 percent discount if the loan is taken by agriculturists and women.
- Relationship with the Financial Organization: As mentioned above, existing customers may get a discount on interest rate. However, it is true when the relationship shared between is in good terms. Such facility is not available for defaulters or frauds, but those with perfect repayment records and making regular payments.
- Jewel Loan Amount: Depending on the gold purity and weight, also type, the loan amount differs. Muthoot can offer as less as Rs. 1,500 as loan, while SBI offers Rs. 10,000 as starting loan amount. The former can offer up to Rs. 1 crore, while the latter can provide up to Rs. 20 lakhs. Higher the amount, greater would be the interest payout as well, and vice-versa. Thus, it is important to study all these factors before analyzing the cost of loan.
- Gold Loan Tenure: Interest rate will only fluctuate if it is floating and same if fixed. But the tenure of the loan decides the total cost of the loan. If a person takes a loan for a longer tenure, it is natural that he will be paying a higher interest component, against a loan at a similar rate, but a shorter tenure. Muthoot and SBI both offer flexible tenure, maximum period is 36 months.
- Loan to Value Ratio: The RBI has mandated that be it a bank or NBFC, they cannot provide more than 75 percent of the gold’s current value as loan. Muthoot and SBI follow these guidelines, and keep a margin of at least 25 percent, while providing loan. However, if the gold has a lower purity and the person’s credit profile is not convincing enough, then loans on lower LTV could be offered. Any processing fee, GST etc are chargeable on the loan.
Why to Check State Bank and Muthoot Finance Gold Loan Interest Rates?
Before applying for a gold loan with either SBI or Muthoot, one must be aware as to why comparing the rates is important and how it would benefit him/her.
- Calculate the Loan Cost: Knowing about fees, charges, interest rates by SBI and Muthoot, the applicant will be able to calculate the total cost of the loan against gold and how much it would affect him financially and how to plan the repayments.
- Understand Which a Suitable Scheme is: Both the institutions have a large base of borrowers who remain satisfied with the services. In such a scenario, how should one select between the two? One way to do is compare the interest rates and other terms, such as repayment period, fees, penalties, additional facilities, etc to note which scheme and financial institution is best-suited for the loan.
- NBFC vs. Bank: Many prefer taking a loan against gold from NBFC than bank, as they provide better terms and conditions. But banks are not behind either, and have served customers at their level best. Thus, a practical approach to know which an ideal choice for a gold loan is to rise above the prejudice about a certain bank or NBFC, compare the loan details, and then take a pick.
Muthoot Finance Limited and State Bank of India are both major providers of gold loans in India and each of them have their own sets of pros and cons. An applicant can apply with both for jewel loans and check, which will offer terms that are a perfect match for needs.
