Why Is The Demand for Gold Loan Increasing?

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With the loan providers expanding their branch network in the fiscal year 2018-19, India’s gold loan market is booming at an unexpected scale. It is expected that India’s loan against the gold market will reach Rs 4,617 billion by 2022. Along with the organised players in the gold market, the unorganised players are also a significant factor why the gold market is expanding. 

Here are some of the essential reasons why the demand for gold loan is increasing:

  1. The emergence of the online gold market:

    With the advent of digital gold loan markets, the demand for a gold loan has undoubtedly spiked. The online models in the gold loan space are primarily governed by non-banking financial companies (NBF), and thus they continue to be frontrunners in the gold market.
  1. High loan to value ratio:

    To tackle the liquidity and gold price volatility ratio various banks and non-banking financial institutions continue to provide loans of higher amounts. Non-banking financial companies may also offer up to 90% of the value of gold assets. 
  1. No credit history:

    The process of availing a gold loan is convenient and straightforward. You don’t need to show any record of bank statements or income proof. There is also no requirement of any credit history or past repayment records as you can quickly get a gold loan based on the purity of the gold asset. 
  1. Usage of gold loans:

    The good part about a gold loan is that there is no restriction on end usage of a gold loan. You can use the gold loan for any personal or business need.
  1. Low-interest rates:

    Along with the easy availability, gold loans are offered at low-interest rates. This is because gold loans are taken against the gold futures. The lowest rate of interest for a gold loan stands at 9.10%.
  1. Flexible loan amount:

    There is flexibility in the loan amount offered by the banks and other loan providers. You can get loans of smaller and higher values depending on the value of the gold that you have pledged. Presently, the gold rate for 24 Carat gold stands at Rs. 44,790 per gram. The 22-carat gold rate is Rs. 43, 790 per gram.
  1. Minimal documents:

    To avail a gold loan, you don’t require documents for income proof. A gold loan can be taken with minimum documents like identity and address proof. Also, there are lesser formalities for the verification of documents, unlike any other loan. However, banks do verify the purity of gold assets that you have pledged against a gold loan.
  1. Flexible repayment options:

    Unlike any other loan gold loan provides a flexible mode of repaying the gold loan. You can repay the gold loan using methods such as:

    – Bullet repayment scheme: Using this mode of repayment, you can pay the entire outstanding amount at the end of the maturity period.

    – EMI scheme: You can also repay the gold loan by paying the monthly instalments of the loan.

    – A gold loan can be repaid by paying the interest of the loan during the tenure of the loan, and another outstanding amount is paid at the end of the maturity period.

  2. Gold loan calculator:
    With the availability of online tools like gold loan calculator, the process of taking a gold loan has become more convenient. Who the help of a gold loan calculator, you can easily calculate the loan amount you can get against the value of the gold ornaments that you have.

  3. Safety of the gold:
    The loan lender safely keeps the yellow metal which is pledged as collateral for a gold loan. Thus, you can be assured about the safety of gold.

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