Understanding Jewel Loan Interest Rate

Learn about key factors like loan amount, tenure, and gold purity that directly impact jewel loan interest rates and how you can use this knowledge to get better deals.
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Understanding Jewel Loan Interest Rate
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2 mins
11 April 2024

Whether you are looking to handle an urgent financial requirement or take advantage of an investment opportunity, a gold loan can be an excellent option. However, before applying, it is crucial to understand how the jewel loan interest rate affects your borrowing costs and overall repayment. Knowing the right interest rate can help you select the most affordable loan and avoid unnecessary expenses. This is where a gold loan calculator becomes a useful online tool. It allows you to estimate your jewel loan interest rates, your payment frequency, and plan your finances wisely. With this tool, you can make smart, informed decisions that suit your financial needs. Using the calculator also gives you better clarity on how much loan you can afford and helps you choose a lender that offers competitive interest rates, ensuring a smooth borrowing experience.

What is a jewel loan and how does it work?

A jewel loan, also known as a gold loan, is a secured loan where gold jewellery is pledged as collateral to obtain funds. This financial service is widely popular in India due to its simplicity, accessibility, and quick processing. Offered by banks, non-banking financial companies (NBFCs), and cooperative societies, jewel loans are ideal for meeting urgent financial needs, such as education, medical emergencies, or business expansion.

The process begins with the borrower submitting their gold jewellery for evaluation. The lender assesses the purity and weight of the gold to determine its market value. Based on this value and the loan-to-value (LTV) ratio, which is typically up to 75% of the gold’s worth, the loan amount is sanctioned. Borrowers can choose repayment options, such as monthly interest payments or bullet repayments at the loan tenure's end.

Interest rates on jewel loans are generally competitive, ranging from 7% to 12% annually, depending on the lender and loan terms. The tenure usually ranges from a few months to a year, providing flexibility to borrowers. Once the loan and applicable interest are repaid, the pledged gold jewellery is returned to the borrower.

This loan option is particularly attractive because it does not require a credit score check or lengthy documentation, making it a quick and efficient way to address financial emergencies while retaining ownership of your valuable gold assets.

Current jewel loan interest rates in India

Bajaj Finserv Gold Loan offers one of the most competitive jewel loan interest rates in the market, making it a practical option for individuals looking to get funds against gold jewellery, without selling it. The jewel loan interest rate at Bajaj Finance starts from 9.50% to 24% p.a., depending on the loan amount, tenure, and your profile. This affordable rate structure helps you manage urgent financial needs, whether it is for medical expenses, education, or personal needs.

With Bajaj Finance, you can also enjoy multiple repayment options like monthly, quarterly, half-yearly, or annual payments, offering great convenience. The company follows the Reserve Bank of India (RBI) guidelines and offers a maximum loan-to-value (LTV) ratio of up to 75%, ensuring you get the highest possible loan against your gold jewellery. Here is a list of charges applicable on a gold loan by Bajaj Finance:

Types of fee

Applicable charges

Interest rate

9.50% p.a. to 24% p.a.

Processing fees

0.15% (inclusive of applicable taxes)

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount

Cash handling charges

Rs. 50 (inclusive of applicable taxes) applicable for cash disbursement only.

Penal interest

Rs. 8 p.a. on outstanding balance 

The penal interest margin/rate will be over and above the interest rate slab. This shall be applicable/chargeable in case of default in repayment of the outstanding dues.

Part-prepayment charges

NIL

Foreclosure charges

NIL

 

Factors that influence jewel loan interest rates

  • Market conditions: Keep an eye on the latest market trends, as gold loan interest rates are influenced by economic factors, inflation rates, and the existing demand and supply for gold. This can give you an idea of the general interest rate environment.
  • Loan-to-value (LTV) ratio: The LTV ratio is a key factor for lenders in determining the maximum loan amount they can provide, which is based on the value of the gold jewellery you use as collateral. With Bajaj Finance, you can receive a loan amount of up to 75% of the market value of your 18-22 karat gold jewellery.
  • Loan tenure: The interest rate for your gold loan is also influenced by the duration of the loan. Longer loan tenures may result in higher interest rates compared to shorter ones. It is important to choose a gold loan tenure that aligns with your repayment capacity, while also considering the impact on the interest rate.

To help you easily navigate this process, here are some practical tips on how you can obtain the best interest rates on your loan against gold.

How to calculate interest on a jewel loan

Calculating interest on a jewel loan is essential for understanding the total cost of borrowing. Jewel loans are secured loans where the pledged gold determines the loan amount and interest. The interest is typically calculated using the simple interest formula:

Interest = (Principal × Rate × Time) / 100

Here, the principal is the loan amount, the rate is the interest rate charged annually, and the time is the loan tenure in years. For instance, if you borrow ₹1,00,000 at an annual interest rate of 10% for 6 months, the interest would be ₹5,000:

(1,00,000 × 10 × 0.5) / 100 = ₹5,000

It’s important to know that some lenders may apply monthly interest compounding, which can slightly increase the total repayment amount. Using a gold loan calculator is a convenient way to estimate the interest payable and plan your repayment schedule effectively.

Ensure you check the loan's terms and conditions, including additional fees such as processing charges or prepayment penalties, to have a comprehensive understanding of the total borrowing cost.

Tips to get the best jewel loan interest rate

Getting the best interest rate on a jewel loan can significantly reduce your repayment burden. Here are some practical tips to ensure favourable rates:

  1. Compare lenders: Research and compare different banks, NBFCs, and financial institutions to find competitive interest rates.
  2. Leverage your credit score: A high credit score indicates financial responsibility, which can help negotiate better rates.
  3. Opt for a higher loan-to-value (LTV) ratio: Some lenders offer preferential rates for customers pledging gold with higher purity or value.
  4. Negotiate terms: Always ask the lender if there’s room for rate negotiation based on your repayment history or existing relationship.
  5. Choose short tenures: Shorter loan tenures often attract lower interest rates, as lenders face reduced risk.
  6. Avoid unnecessary add-ons: While optional insurance or services may be offered, they could increase the overall cost.

Lastly, timing your online gold loan application during promotional offers or festive seasons can also secure lower rates. With Bajaj Finance, you can benefit from transparent terms and competitive rates. Always read the fine print and use a gold loan calculator to evaluate the best option.

Jewel loan eligibility and documentation

Eligibility Criteria

  • Nationality: Indian
  • Age: 21 to 70 years
  • Gold purity: 18-22 karat

Documents Required

  • Any one of the following:
  • Aadhaar card
  • Voter ID card
  • Passport
  • Driving licence
  • NREGA job card
  • Letter issued by National Population Registration

Though PAN card is not mandatory, it is required for loans exceeding Rs. 5 lakh.

Steps to apply for a jewel loan with affordable interest

To apply for a gold loan, you just have to follow a few simple steps:

  1. Visit the lender's website and click on 'APPLY' to access the online application form.
  2. Enter your 10-digit mobile number and click on 'GET OTP' to receive a verification code.
  3. Submit the OTP to verify your identity.
  4. Select your state and city to locate the nearest branch.
  5. Provide your full name and date of birth as per your PAN card.
  6. Schedule an appointment at the chosen branch.

Once completed, expect a call from the lender's representative to confirm your appointment and guide you through the next steps.

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Frequently asked questions

How much loan can I get for 1 gram gold?
The amount of loan you can get for 1 gram of gold depends on factors like the purity of the gold, current market value, and loan-to-value ratio set by the lender.
How is jewel loan calculated?
Jewel loan is calculated based on the purity and weight of the gold jewelry pledged as collateral. Lenders assess the gold's value per gram according to current market rates and offer a loan amount.
Is jewel loan a good option?

A jewel loan can be a good option if you need quick funds and have valuable gold assets. It typically offers lower interest rates compared to personal loans and doesn’t require extensive documentation. However, it’s essential to ensure you can repay the loan to avoid losing your gold.

What are the repayment options for jewel loans at different interest rates?

Jewel loans offer flexible repayment options to suit varying financial needs. Borrowers can opt for EMIs, where both the principal and interest are paid monthly. Alternatively, bullet payments allow repayment of the entire principal and accrued interest at the loan’s maturity. For loans with lower interest rates, opting for longer tenures can reduce monthly burden. Conversely, short-tenure loans may save on total interest paid for higher rates. Bajaj Finance offers customisable repayment schedules, ensuring ease for borrowers at different rates. Always review terms to choose a plan aligning with your financial capacity and long-term goals.

What are the advantages of low-interest jewel loans for borrowers?

Low-interest jewel loans provide significant savings on overall repayment costs, making them an ideal choice for borrowers. Reduced interest rates lower monthly EMIs, enabling better cash flow management. These loans are especially beneficial for short-term financial needs, ensuring minimal repayment burden. Additionally, they encourage timely repayment, which can positively impact your credit score. Borrowers can also negotiate better terms and enjoy greater loan-to-value (LTV) ratios on their pledged gold. With lenders like Bajaj Finance offering competitive rates, low-interest jewel loans become a cost-effective option for managing financial emergencies without liquidating valuable assets.

How can I reduce the interest on my jewel loan?

To reduce interest on your jewel loan, start by comparing lenders for competitive rates. Maintaining a high credit score can also help secure better deals. Opt for shorter loan tenures, as they typically attract lower total interest. Regularly monitor gold prices, as higher valuations can increase LTV and reduce rates. Timely payments or early loan closure also minimise interest costs. During festive offers or promotional periods, lenders like Bajaj Finance provide special discounts. Lastly, negotiate rates based on your financial profile and ensure clear understanding of the loan’s terms before signing any agreement.

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