Gold loan is a banking product that allows you to borrow against the gold you own. The market is of great interest to me, because of its potential for higher returns, and also for its convenience for small investors. Hence, I believe it would be beneficial for you to know how it works.
The gold market in India is the world’s largest consumer of gold. With a cumulative/gross household gold volume believed to be 25,000 tonnes, it is estimated that Indians own nearly 17% of the global total in value terms.
The current Indian gold loan market is ₹ 2.9 Lakh crore, and it is expected to grow 60% by 2022. This number is enormous and still considered low when you consider that it represents only half of the total gold loan market in China or roughly one-tenth of the volume of world gold loans.
But gold is not an ordinary product; it has been a part of our culture for ages. It is also considered as a form of insurance against inflation. Gold can be availed at bankers or pawn shops, or even post offices in India. Gold loans are available at low interest rates, although you have to pay additional charges if you want to take back the gold jewellery in case of defaulting on repayment.
Why do People Take Gold Loans?
People who apply for gold loan are those who want to build their future. They are mostly self employed or small business owners. These people also care about their financial health. They are not foolish enough to invest in something that they don’t know or understand. These people need money but cannot get a loan from traditional banks because they don’t qualify or have collateral like home mortgage, car or any other form of collateral.
The majority of people in India are working in the unorganized sector. They don’t have regular or fixed incomes, making it difficult for them to put food on their tables and ensure a good education for their children. We can change that by helping these families get on stable financial footing through an innovative money-lending program that aligns with some of our core values. Here’s how it works: When someone gets a job, we lend them money against future income that they will pay back after they receive their first paycheck.
A gold loan requires much less paperwork, as compared to a personal loan. A gold loan is available for both salaried and non-salaried individuals. As gold is considered a valuable asset, you need not worry about showing proof of income. You can take a gold loan without worrying about credit score or documentation.
Get a loan instantly with the purchase of gold ornaments. You can mortgage the gold ornament and you only need to provide your address and identity proof, and you are good to go. There is no requirement to produce income statements, ITR etc.
The bank doesn’t lose money, because the loan is backed by gold. Basically, gold loan is a form of secured loan where the borrower can get 100% less than the market price. In this case, if the farmer fails to repay the loan, then he will have to give back his gold item along with gold loan interest rates. The process is hassle free as well and can be done online or at any branch.
And what if gold prices fall?
In Indian culture, gold is considered the safest and an ideal investment. Whether it is weddings, making a home or to education, loans against gold are used to fulfill many needs. It’s a great way to sell any unwanted gold jewelry such as chains, rings, bangles etc and make some extra money in case of emergencies.