The complex world of credit instruments has entailed the problem of inaccessibility for a long, but the landscape of lending appears to be changing. The growth of India’s fintech industry is transforming access to credit for millions of people by simplifying the application process, cutting short the time for approval, and making the system transparent. This has provided new opportunities for Indians to meet their financial needs in a convenient manner.
In the past few years, gold loans have emerged as a viable option for many to access credit in times of need such as for a big purchase, or for sponsoring family trips around festival seasons. In India’s current digital economy, financial technology companies or Fintechs are playing a critical role in growing the market for gold loans, with automated processes, quick approvals, and minimum documentation. Gold loans have proven as a better alternative to personal loans, given the costly EMI imposed in the current paradigm that comes with the latter. Here, we take a look at some of the features of a gold loan that make it a go-to option for millions of people:
1. Eligibility criteria made easy
Eligibility has long been a concern for many when applying for a loan. In case of a gold loan, the process is fairly simple, as anyone above the age of 18 can avail a loan, without the need of a borrowing history or CIBIL score upto a certain limit. The loan is given against the gold kept as collateral, and people from all walks of life, be they a housewife, college students, business professionals, or anyone can be eligible for it.
2. Quick processing and timely disbursal
The advent of advanced digital technologies has drastically altered waiting periods for accessing credit, and several fintech companies leverage a quick processing mechanism to onboard customers and deliver a seamless experience for the borrower. Gold loans have been simplified, made more direct, and are one of the most secure financing options in today’s time.
3. Incredible Loan-To-Value ratios
In 2020, the Reserve Bank of India generated a circular to relax gold loan LTV ratio from 75% to 90%, providing a lucrative option for borrowers to receive a higher value against their gold jewellery. Getting a substantial amount of money in case of an emergency can be difficult, but gold loans offer this at short notice & such urgent needs can be met with ease within the comfort of your home. Be it for a medical emergency, or even for financing a child’s education, gold loans thus can be a convenient and impactful option.
4. Affordable interest rates
Unsecured loans, such as personal loans come with high interest rates. The recent developments in the global economy have witnessed several interest rate hikes, making interest payments a costly affair. For gold loans, the interest rate is significantly lower, starting as low as 8.5%per annum. Rising gold prices in markets also enable borrowers to gain from a reduction in the interest they pay, and hence, gold loans provide an opportunity for individuals to manage their finances better
5. Ease of repayment
A key highlight of gold loans is the flexibility with which one can repay the loan. Gold loans come with flexible repayment options, where borrowers can choose to only pay interest initially, and pay the remaining amount at the end of the loan term. Banking institutions and gold loan companies also don’t apply foreclosure penalties, which makes gold loans even more attractive.
Gold loans are thus a reliable option for people to opt for in times of an emergency, for sponsoring a vacation, or on approaching a sizeable purchase. Out of the plethora of loan options available today, gold loans make for a secure, highly convenient and beneficial option for people.
Author: Vijay Malhotra, Co-Founder & Chief Sales Officer, SahiBandhu