Covid-19 impacted economies all across the world. Businesses were closed, and people lost their jobs due to the lockdown measures implemented by the government.
Individuals found it difficult to pay-off their monthly bills due to this. Taking out a gold loan came in handy in this scenario.
Adverse conditions always see gold loan demand skyrocket. This is because people look for solutions to safeguard their finances and obtain the funds to survive.
Distressed Indians pledged gold of Rs. 62,926 crores for gold loans during the pandemic (as of September 2021), up 66% from August 2020.
Muthoot FinCorp Ltd., one of the major gold loan providers, reported a 28% increase in gold loan AUM during the pandemic in 2020.
Why does this happen? Why do people seek out more gold loans when they have financial difficulty? Let us find out.
Why is Demand for Gold Loans Growing During the Pandemic?
The demand for gold loans surged during the pandemic due to the following reasons:
1. Eligibility Criteria Easy to Meet
Financial institutions have tight eligibility conditions, such as a high CIBIL score and income restrictions, especially in difficult times when it comes to unsecured loans, such as personal loans.
As a result, the demand for gold loans grows because a person may get one with easy eligibility requirements.
Furthermore, many lenders also offer gold loans online with in-house loan assessments.
A person may not be required to leave the house to complete the gold loan application or receive funds because the process is fully digital.
2. Usage
The benefit of a gold loan is that it has no restrictions on using it. A gold loan can be used for any purpose, including funding for weddings, education, business expansion, and other similar endeavours.
This is why there is a surge in its demand during challenging times.
3. Low-Interest Rates
The most significant advantage of a gold loan is that it has lower interest rates than personal loans because gold is used as collateral.
In addition, when compared to a personal loan, a gold loan has no or lower processing fees.
A person can receive a gold loan from Muthoot FinCorp with interest rates starting at only 11.99% p.a.
There are no foreclosure charges with Muthoot gold finance if one repays the whole loan within three months, and the processing fee is similarly low, ranging from Rs. 20 to 0.25% of the loan amount.
4. Repayment Flexibility
Gold loans provide quite a flexibility to borrowers during repayment, making them a wise choice during difficult times.
Individuals can repay the gold loan at once or pay the monthly interest.
Bullet gold loan repayment occurs when a borrower chooses to pay off the principal and interest owed after the loan term in one lump sum payment.
Another alternative is to pay the total interest due on a gold loan in monthly instalments while paying off the entire principal repayment amount in one lump sum at the end of the loan term.
5. Quick Approval
Lenders require only minimal documentation to process a gold loan. Borrowers must only provide the gold item and some documents. This makes obtaining a gold loan simple in difficult circumstances.
Further, a person may not be required to provide proof of income or credit score in a gold loan, making it easier to get during challenging times.
Getting Muthoot gold finance is simple and seamless, as the process is authorised promptly at the best interest rates and with minimal documentation.
6. Rising Gold Prices
Gold prices also reached and crossed all-time highs in 2020. It enticed many people with spare gold hanging around their homes to take out a gold loan.
The current market value of gold is used to determine its worth. As a result, investors may be able to receive a higher return on their gold.
Conclusion
In India, the need for instant cash due to life’s emergencies is higher than ever.
Whether it is an illness, a health emergency, or an accident, unanticipated expenses can derail one’s financial goals. Individuals can finance their requirements with gold loans without selling off their precious jewellery.
However, to receive the best gold loan deal, an individual needs to compare several digital lenders. Before making a final decision, they need to also investigate the lender’s credibility.
Muthoot FinCorp, one of India’s most well-known and trustworthy gold loan firms, can provide a gold loan promptly and fulfil your short term needs.
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