Gold ornaments are a tangible asset into which people have always invested without any apprehension. The option of gold loan for meeting urgent fund requirements has been a factor that amplified gold sales. It is easy to get a gold loan in India, with several gold loan companies offering money based on the value of the asset. Before approaching any gold loan company, it would be better if you could examine their terms and conditions before mortgaging the jewelry for a gold loan.
The COVID-19 pandemic has led to a volatile economic situation across the country. Consequently, the demand for gold loans in India skyrocketed since the second quarter of the previous fiscal. Presently, with the second wave of the Coronavirus pandemic, the gold loan demand is registering a quantum rise again. Market research indicates that almost all gold loan companies offering gold loans in India has reported good increase in the number of new customers acquired in the recent past.
Let’s see the reasons for the increase in gold loan demand amid the Coronavirus crisis.
Impact of COVID-19 in the Business Sector
Even though the government has relaxed COVID-19 restrictions, the businesses haven’t yet returned to full-fledged operations as before. With the second wave of Coronavirus hitting the country with higher intensity that has resulted in increased mortality and spread rate, the nation is going through an unforeseen scenario. Gold loans became the only option to meet the financial needs. This is the major reason that increased the demand for gold loans in India. Our discussion with more than one gold loan company around the nation indicates the same.
Better Interest Rate than Other Options
The finance options available to individuals are gold loan, personal loan, and loan against credit cards. The main aspect that distinguishes gold loans in India from the other two is the interest rate. You will have to pay a minimum interest of 15/20% in the case of a personal loan. Besides the fact that many a time banks are not welcoming in the case of personal loan. The loan against credit cards has an interest rate ranging from 22% to 30%+. A gold loan company offers loans at a very much less interest rate than both of these two.
Changes in Loan to Value (LTV) Ratio
Earlier the Loan to Value (LTV) ratio, i.e. the loan permitted for a particular value of gold, was 75%. Considering the prevailing situation, to boost the financial transactions and to extend financial support to the common people, the Reserve Bank of India increased the LTV from 75% to 90% for banks and this was valid till 31 March 2021. The increased LTV helps customers get maximum money by pledging their gold, thus averting the compulsion to sell the asset. It elevated the demand for gold loans during this period.
Unlike the other types of loans that require a number of documents and exhaustive paperwork, a gold loan can be obtained quickly. Some of the reputed gold loan companies offer online gold loans as well. This makes a gold loan in India the most viable option. One can receive a gold loan within minutes or hours. At the same time, we request you to check the terms and conditions, as well as interest rates, before signing the document. Each gold loan company will have different criteria and clauses.
The easy and quick availability of funds has been the pivotal factor in increasing the demand for gold loans amid the Coronavirus crisis. People, who have been severely hit due to financial impediments, have turned to gold loans, leading to higher demand for gold loans.