What factors influence the interest rates offered on gold loans?

Following are some of the typical factors that impact the interest rates charged on gold loans:

• Quantity of Gold Pledged: Usually, higher gold quantity attracts lower rates.
• Quality and Purity of Gold Ornaments: Superior quality gold gets better rates (18-24 carats).
• Loan Amount: A larger loan size can qualify borrowers for cheaper rates.
• Loan-to-value (LTV) ratio: Usually, a higher LTV ratio up to 75% may reduce interest rates.
• Applicant's Credit Score: Borrowers with high credit scores typically get lower interest rates.
• Applicant's Income Stability: Salaried customers may get cheaper rates.
• Location of Borrower: Generally, rates are lower in bigger metro cities.
• Lender Type: Non-Banking Financial Companies (NBFCs) may usually offer more competitive rates than other financial institutions.
• Relationship with the Loan Provider: Usually, existing customers may get reduced interest rates.
• Market Competition: More lenders in the area can lead to more competitive rates.
• Market Gold Rates: Interest rates are indirectly affected by gold prices.
• RBI's Monetary Policies: Key policy rates like repo rate influence gold loan rates.

It is important to remember that different lending institutions have their own distinct interest rate policies and slabs. The same applicant may get varying loan quotes from different gold loan providers based on each one's proprietary metrics and risk models. It is therefore advisable that you compare rates across financial institutions.