There is a common myth floating around that some gold loan lenders charge “1 paisa interest” on the rupee, making it sound negligible. Let’s clear up the confusion:

Myth: “1 paisa interest” means you pay almost nothing on your gold loan.

Fact: The phrase usually means “1 paisa per rupee per month.” Since 1 rupee = 100 paise, 1 paise on 100 paise each month is actually 1% per month. Over a year, that adds up to roughly 12% per annum. In other words, 1 paise per month = 12% p.a.

So a ₹1,00,000 loan at this rate costs about ₹12,000 in interest per year, not ₹1,000.

To see why, note that “1 paisa on the rupee per month” is the same calculation as in standard interest formulas: Total yearly interest = 1 paisa × 12 = 12 paise per rupee (annually) = 12%.

A useful way to think of it: When banks quote interest as “paise” on a rupee, they often mean monthly interest in paise. For example:

• 1 paisa per rupee per month = 12% p.a.
• 1.25 paise per rupee per month = 15% p.a.
• 2 paise per rupee per month = 24% p.a., and so on.

Pitfall: Sometimes lenders advertise attractive-sounding “paise” rates. Borrowers might hear “just 1 paise interest” and assume it’s tiny, but the yearly rate is significant. Always ask, “Is that per month on a rupee?” and then convert to a yearly percentage to understand the true cost.

Another myth is treating that paise rate as if it were per day (some social media rumors say “1 paise per day” – Don’t fall for it!). Gold loan interest is almost always calculated monthly (or yearly). If someone claimed “only ₹1 per day per ₹1,000 borrowed” (which would be 0.1%), that would wrongly imply a 36.5% annual rate.

In reality, banks follow RBI regulations and disclose rates clearly. Kandhavillas Fincorp, for instance, shows its annual rate (like 11% or 12% p.a.) rather than mystifying paise terms.

Bottom line: “1 paisa interest” is not an amazing deal – it equates to a normal double-digit annual rate.

Quick tip: A handy formula: (Paise per rupee per month) × 12 = annual interest (%).

E.g. “1.25 paisa” monthly → 1.25×12 = 15% p.a.; “0.5 paisa” → 6% p.a.

By debunking this myth, borrowers can avoid confusion and compare offers fairly. Kandhavillas Fincorp provides clear rate information (for example, stating 11.5% p.a.), so you know exactly what you’re paying each year. There are no secret “paise tricks” in their loan documents.