A gold loan is a loan in opposition to gold. It is a secured loan taken by the borrower from a lender by pledging their gold as collateral. A loan amount is provided typically up to 80% by some percentage of the gold, based on the current market cost and quality.
The gold loan section for organized commercial banks recorded the highest credit growth at 33.8% among all the sectors. While many people are looking to convert their gold holdings to meet their immediate needs.
The gold loan very skillful with banks has increased from Rs 46,415 crore to Rs 62,101 crore in 2020. Since March 2020, it has increased by 86.4%, or Rs 33,308 crore, RBI data shows. Industry insiders note this is only the business done by programmed commercial banks.
Gold loans will utility not just the requirement side but also the supply side vital, as many banks and their target this product segment adequate on account risk profile. Here the question is: When should you consider taking a gold loan?
The main reason was to take the gold loan trends many businesses shut, jobs lost and salaries tearing after the pandemic began last year, their gold to borrow money to meet necessary expenditure as well as emergency medical requirements. Struggling small businesses may also have tried to raise their funds this way.
The gold loans had the secure option because the resale value, if the loan is not repaid, is higher than all security, for any bank.
Some private sector banks boost up the number of branches offering gold loans in rural India, where money lenders remain predictable. A lower interest rate on gold loans was another attraction parts for the borrower after the RBI slashed rates during the pandemic.
More importantly, it’s not just the recent process gold loans have continued in India for ages, carried on by moneylenders and pawnbrokers who operate in lanes by lanes across the country.
Without a valid credit score, they face many difficulties in getting loans from banks. With the massive demands of interest rates of local moneylenders as the reference, the deal offered by gold loan NBFCs was a compelling proposition by contrast.
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Gold loans are increasingly becoming popular. As many institutions are now providing these loans at very attractive rates, more people are opting for gold loans to fulfill their needs. The blog gives a detailed description of how gold loans increased over the years. The reasons that have contributed to their popularity are also mentioned. The blog also briefly touches upon the importance of gold in the country’s formal and informal economy. The blog will really help readers understand the significance of gold loans and why they are considered safe.
A gold loan can be a better choice if you can repay the loan in a shorter duration and have a lower interest rate. On the other hand, a personal loan would be better for a longer tenure & higher loan amount. You must thus compare both loans depending on the requirement of your financial needs.
How to get a gold loan?
Relationship with the bank – Most lenders offer gold loans to their existing customers, though, in some cases, individuals who have no history with the bank can also avail gold loans. However, existing customers of banks/lending institutions are typically in a better position to negotiate for a lower interest rate.
What is the interest rate on gold loan?
Gold Loan Interest Rates Click here to Check your Eligibility! The interest rates on gold loan, availed by pledging gold, are relatively lower than other types of loans and range between 7.35% to 29% p.a. Banks and other financial institutions in India offer gold loans, the loan amount for which ranges from Rs.1500 to Rs.1.5 crore.