Hidden Gold Loan Charges — What Banks Don't Tell You
When comparing gold loans, most borrowers focus only on the interest rate. But the real cost of borrowing includes several hidden charges that can increase your effective interest rate by 2–5% above the advertised rate.
Complete List of Gold Loan Charges
- Processing fee (0.5–2%): Charged upfront on the loan amount. SBI charges 0.50%, while NBFCs charge 1–2%
- Valuation/appraisal fee (₹200–500): For testing gold purity using XRF machines or acid test
- Stamp duty (0.1–0.5%): Varies by state. Maharashtra charges 0.1%, Karnataka charges 0.5%
- Documentation charges (₹100–500): For loan agreement preparation
- Insurance premium: Some lenders insure pledged gold and pass the cost to borrowers
- GST at 18%: Applied on ALL the above service charges
- Renewal fee: If you extend the loan tenure, additional charges apply
- Auction charges: If you default, the lender auctions your gold and deducts auction costs
How to Minimize Charges
- Negotiate processing fee — many banks waive it for existing account holders
- Choose banks over NBFCs for lower overall charges
- Compare the effective interest rate (not just the nominal rate) to see the true cost
- Avoid renewals — plan to repay within the original tenure to avoid renewal fees