Increasing Gold Prices is Directly Propositional to Demand for Gold Loan: Expert View


 In the domestic market, the gold price is hitting a record high. In the current pandemic scenario, gold shines as a ray of hope for individuals as well as many small businesses. For people, a gold loan serves as a good option to meet an immediate need. Gold prices and its demand is on the rise.

Banks take advantage of this opportunity and have started to reach out to customers with the gold loan proposition.  A rise in the value of gold helps customers raise a better loan amount against the gold. A lot of demand is coming from traders and shopkeepers too, with the opting for gold loans to restart their operations after the lockdown.

  As the nation-wide lockdown impacts the businesses, many of them are short of collateral to provide against bank loans. So, they prefer to opt for gold loans which make the quickest form of their working capital. One lender says gold is seen as a commodity whose price is going up. This time people opt for the easy gold loans. Here they can provide gold as easy collateral. The rise in gold loan prices is also heartening news for the existing gold loan borrowers. They see the market value of gold increasing and consequently can raise a better loan amount against their deposits. A source from Muthoot Finance has said if the prices of gold rise, the collateral value of loans given to the customers goes up. Borrowers who want to enjoy maximum value for their gold as loans can borrow a higher amount as loan.

  Muthoot Finances introduced ‘Loan at Home’ and ‘Gold Unlocker’, a gold credit line in which customers can avail credit line against their idle gold. The company is also offering a 5% cashback on online interest remittance. This will encourage people to use digital channels for repayment of interest and principle. The current interest rate of gold loan by SBI is 7.5% and that offered by Muthoot Finance is 12%, and Manappuram 12%. If a customer plans to take a fresh gold loan, the following things are to be kept in mind. First, find out if he/she should opt for it or not. Those wishing to get their cash flow straight can opt for gold loans. The loan amount against gold is usually up to 75% of the estimated gold value. The purity of gold does count well too. If gold bars and biscuits are brought in for loans, banks do not accept them.


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