Millions of people worldwide have been affected by the COVID-19 pandemic, resulting in job losses, pay cuts, and financial uncertainty. As a result, people are turning to safe and secure ways to manage their finances, and one such option that has gained popularity is gold loans.
Gold loans are secured loans where borrowers pledge their gold jewelry as collateral to secure a loan. The loan amount is based on the value of the gold, and borrowers must repay the loan with interest within a specific period. Gold loans have become a more popular choice for personal finance during the pandemic due to various reasons.
In times of financial crises, gold loans can be an ideal solution for those who need immediate financial assistance. Unlike personal loans that have equated monthly installments (EMIs), gold loans do not have EMIs, so borrowers do not have to pay back the loan every month. Instead, borrowers can pay once every 6 months or year, only interest, making it more convenient. Moreover, there are no pre-closure charges or processing fees, making it a cost-effective solution. Unlike personal loans that require a credit score and income proof, gold loans do not need any credit score or income proof, making it accessible to everyone. The documentation process is also simple and requires only KYC and a bank account. Even self-employed individuals can quickly get a gold loan. Lastly, the tenure of a gold loan is flexible, ranging from 30 days to 12 months, making it an ideal solution for those who need financial assistance for a shorter duration.
Gold loans are secured loans, meaning borrowers have to pledge their gold jewelry as collateral, which reduces the risk of loan defaults, making lenders offer gold loans at lower interest rates than unsecured loans. This makes them a more affordable financing option.
Gold is a relatively stable asset that retains its value over time. During times of economic uncertainty like the pandemic, people tend to invest in gold as a safe-haven asset, leading to a surge in demand for gold loans as borrowers use the value of their gold jewelry to access credit.
Gold loans have a quick and easy approval process, making them a convenient financing option for people facing financial emergencies during the pandemic. Borrowers can get a loan instantly by pledging their gold, eliminating the need for lengthy documentation and waiting periods.
Tech-enabled gold loan companies are also on the rise, providing a faster, more convenient, and transparent lending process. These companies use advanced technology to evaluate the value of gold, disburse loans instantly, and provide seamless customer service, making gold loans even more accessible and hassle-free for borrowers.
In conclusion, the COVID-19 pandemic has increased the demand for gold loans as people seek safe and secure ways to manage their finances. Gold loans offer several benefits, including lower interest rates, stable asset value, quick approval, and easy accessibility. As the pandemic continues to impact personal finance, gold loans are expected to remain a popular financing option for people looking for a secure and reliable way to access credit.
Sumit Sharma is Founder, Radian Finserv.