How Are NBFCs Keeping Up With The Gold Demand Surge?

Indians have an emotional relationship with gold and we are known to own large quantities of the yellow metal, which actually does not yield any active returns that financial assets offer.

A gold loan can help monetise that jewellery lying idle at home, when one is short of cash and may need money urgently. The money from a gold loan can be used for anything from paying for urgent home repairs to a kid’s school fees to even a hospital bill that one may not be able to afford.

In India, gold is considered a symbol of status or wealth and has traditionally been used in times of dire needs. Over the past couple of years, in the wake of the COVID-19 crisis that left millions of people jobless, Indian families turned to their personal gold, to bail themselves out of sticky situations.

In fact, the COVID-19 crisis has triggered a surge in demand for gold loans in the country as millions of middle-class families discovered that gold was perhaps a better source of credit than an instrument for saving.

Reasons Behind The Surge In Demand For Gold Loans

Gold loans have been much in demand as getting money against gold is relatively easier and quicker than the other options for short-term borrowing.

Moreover, at a time when credit histories of most people would have been impacted negatively owing to a decline in incomes leading to delayed loan repayments or even defaults, a gold loan would have come in handy.

Apart from financial distress owing to job losses, gold loans also became popular since in the wake of the pandemic the prices of the yellow metal surged, and have remained elevated throughout 2022, especially following the global economic uncertainty following the Russian invasion of Ukraine and the rise in the prices of crude oil in the international market.

Moreover, gold loans also offer a way of getting investment capital for setting up small online businesses, in an age where digital businesses that operate from home are thriving.

Advantages Of Choosing A Good Lender

While scores of banks and non-banking finance companies have come up with innovative gold loans schemes on in order to meet this exponential demand, it’s the NBFCs that have captured a bigger pie of the gold loan market.

Not only do these non-bank lenders offer some of the best interest rates, they also provide value-added services like consultations, back-end support as well as free EMI calculators to help borrowers figure out how much money they will have to pay in installments every month to pay off their loans.

Moreover, in this digital age, these lenders allow borrowers to apply for loans online and complete the entire process from the comfort of their homes. A borrower does not even have to visit the lender’s branch for any paperwork, which can all be done online. Even the gold can be valued and collected right from the borrower’s home, and kept safe in secure vaults during the tenure of the loan.

These NBFCs also offer gold loan repayment options that make paying back the principal loan amount and interest a hassle-free process, which is easy on the borrower’s finances.

Borrowers can choose to pay back the interest first and then the principal amount, thereby reducing their monthly outgo during the tenor of the loan. Alternatively, they can pay back the principal first and then the interest, thereby saving on the actual outgo on an overall basis.

Borrowers can also choose options like partial repayment of principal and interest or even a bullet repayment option where the principal and interest are repaid in one shot at the end of the tenure of the loan.

Low Fees

Most lenders either do not ask for processing fees or keep it minimal. Moreover, most lenders also have minimal or zero foreclosure fees especially if the loan is being foreclosed after a certain period of time.

Minimal Paperwork and No Income Proof

On top of these reasons, gold loans need almost no paperwork beyond an identification proof or address proof. Also, since gold is pledged as collateral, no income proof is needed, as the lender can always invoke the pledge in case of a default. The borrower’s credit score is also not an important factor since the loans depends entire on the gold pledged.

Conclusion

As a borrower looking for a gold loan, you should only choose a reputed lender like IIFL Finance that has a good standing in the market and can offer some of the best interest rates.

Apart from providing the most competitive interest rates, IIFL Finance also offers some excellent value-added services that other smaller lenders may not be in a position to offer.

IIFL Finance fully online gold loan process allows you to apply for a loan from the comfort of your home and even call a company representative to your home for appraisal of the gold ornaments and completing the paperwork. These services make borrowing and paying back the loan a seamless process.