After the economic slowdown in 2020, the Indian economy is reviving, and the retail loan segment is making headlines once again. Alongside the metro cities, tier-I and tier-II cities are also witnessing similar responses. Among various options from this credit segment, gold loans are registering a notable response.
As per RBI’s recent data, the gold loan outstanding portfolio currently stands at Rs. 62,412 crores as of July 2021. This is a 77% jump over the previous year’s portfolio. Apart from its obvious benefits, the best gold loans are in demand due to many factors following the pandemic.
9 Factors Driving the Gold Loan Demand After a Pandemic
Here are the factors that are driving the growth of loans against gold in recent times –
- High gold prices
One of the dominant factors driving the demand for this credit instrument is the high price of gold. Owing to various factors, the market price of this yellow metal is on the rise. As a result, one can source a higher loan amount.
- Higher loan-to-value ratio
In early August 2020, the RBI announced the increase in the LTV ratio of gold loan schemes from 75% to 90%. This enabled prospective borrowers to avail a higher loan quantum than before. However, this offer expired on 31st March 2021. This move played a significant role in amplifying the demand for this financial product in recent times.
- Organised sector
The demand for this financial product has prompted various financial institutions to foray into this segment in recent times. Resultantly, multiple lenders are operating in this sector, offering a host of facilities.
Additionally, these lenders are under the purview of RBI and other governing bodies that ensures transparency. Also, it reduces any malpractice like charging a higher interest rate, applying unfavourable loan terms, and many others.
- Easy application and quick disbursal process
Another factor that played a pivotal role in increasing the popularity of this financial product is its application and disbursal process. Usually, a gold loan takes a few hours to disburse. Once an individual applies online, a representative from the lender’s side will contact the applicant to verify documents and gold appraisal. After this process is complete, they will receive the loan amount.
Furthermore, online gold loan providers extend doorstep services where borrowers can apply for funds without leaving their homes. Here, an executive will visit the applicant’s address to complete loan processing. Thus, it reduces the hassle of visiting a branch.
Apart from these, other prominent factors allowing the best gold loans to make a difference in the borrowing scene of this country includes –
- Affordable interest rate
While discussing the advantages of a credit against gold, it is imperative to mention the applicable interest rate. Compared to its unsecured counterparts offering similar facilities, this financial product extends a competitive interest rate. Thus, the cost of borrowing remains low and helps individuals to repay their credit effortlessly.
- Multiple ways of repayment
Best gold loan providers like Bajaj Finserv extend multiple repayment facilities, which aids individuals in repayment. Apart from repaying via regular monthly instalments, one can use the following methods as well –
- Repaying the interest payable periodically and then the principal amount at the tenor’s end
- Otherwise, one can choose to pay the total interest initially and then pay off the principal amount at the tenor’s end
- Part release facility
Exclusive to this financial product, gold loans extend a part-release facility that allows its borrowers to free up pledged items partially. Here, one can pay a portion of the loan at once, and the lender will release gold articles of that similar amount.
For instance, if you make a Rs. 1 lakh payment, you can get gold articles of that similar amount released.
- Easy-to-meet eligibility parameters
Another factor contributing to the popularity of credit against gold is its lenient eligibility parameters. Typically, any individual above 21 and possesses gold items can apply for this credit instrument. Apart from this, one needs to meet the monthly income requirement to qualify for this credit instrument.
Additionally, availing of this financial product does not require a high credit score. Hence, individuals with a low credit score or poor repayment history can also apply for this credit.
- No restriction of usage
Last but not least, gold loans come without any restrictions over their usage. It means a borrower has the liberty to use it and meet an array of financial needs. This can include medical emergencies, business or personal expenses, and many others.
The current scenario only hints at the positive growth for gold loans after this pandemic. Best gold loan providers with their customer-friendly benefits and other external factors are driving the growth of this credit instrument.