Increase in Gold Loan during the Covid Period


Covid 19 has crippled the world economy. Hundreds of companies have been shut down and thousands of people have lost their job. While many are living off their savings, many are failing to meet their daily needs. Those with the burden of loans are facing tough times as well. Among the financial crisis, the demand for gold loans reportedly is going up. Banks and non-banking financial companies are more than willing to provide gold loan science; it’s a secure loan. The need of financial assistance is quite evident and obvious. However, among many loan instruments, gold loan seems to be becoming the popular choice and here we will find out why!

Lower rate of interest

It is no secret that loans come with a lower gold interest rate than personal loans, credit card loans and other loans. The lower the interest rates the lower the repayment amount. A lower repayment amount means a lower EMI that can be helpful during financial instability. The lower interest rate has always been an advantage for gold loans and it is apparent that in a time of financial distress like the present, it is again working in the favor of the gold loans. As you deposit your gold as collateral, the risks of repayment reduce and the banks offer a lower rate of interest.

Hike in the gold price

The price of gold in the domestic market has been increasing steadily even during the pandemic. As the price goes up, the value of gold as mortgage soars high as well. People are taking advantage of the hike in the gold price and availing gold loans to get a higher loan amount. A higher loan amount with a lower interest rate, as stated earlier, is drawing many borrowers.

LTV ratio increased

RBI has increased the loan to value ratio for gold loans. Instead of the earlier 75%, you can avail a gold loan at a 90% LTV ratio. Hence, you can get a maximum loan amount against your loan. This has favored the loan borrower to a good deal.

Credit score not required

Unlike other loans, credit score is not among the key factors for getting a gold loan approved. The approval depends on the market value of the gold. Therefore, even if you have a lower credit score while applying for a gold loan, there is a good chance of the loan getting approved. Hence, a gold loan is a perfect solution for those with a lower credit score.

Quick processing

The processing of gold loans is faster and easier than other loans. There is no long eligibility list and no tedious paperwork is required. When you face a financial emergency, waiting for the loan approval becomes frustrating. From this perspective, gold loans are way easier to avail. You visit your preferred lender and show your gold asset. The lender will evaluate the value of gold on spot and let you know. If you are happy with the amount, the lender will disburse the loan immediately.

No processing fee

Most of the banks and non-banking financial entities do not impose processing fees on gold loans. Even if any lender does, the fee is generally around 1%. When everyone facing financial emergencies, not having to pay any processing fees is definitely a plus point.

In the time of such a major financial crisis, any financial help is appreciable. Loans provide great assistance; however, the EMIs are added expense. This burden of EMIs can be reduced a bit with gold loans. If the price of gold remains the same or keeps increasing at the same pace, gold will become a more valuable asset and thus will fetch a higher loan amount.