Gold has always been a valuable asset in India, and it has been used as collateral for loans for centuries. In recent years, the gold loan market in India has seen significant growth, driven by factors such as easy availability, quick processing, and lower interest rates compared to other types of loans. George Alexander Muthoot, MD, Muthoot Finance tells in detail all you need to know about gold loan market in India.
BT: How has been the demand for gold loans, recently?
George Alexander: There are some trends observed in the demand for gold loan in the recent times. We at Muthoot Finance, have observed a hike in demand from youngsters. With a spike of more than 50 percent YoY, youngsters are now giving more preference to experiences over material possessions. They are spending more on travel, concerts, and other allied leisure activities. Further, the company has also witnessed a 12 per cent year-on-year growth in demand for gold loans from HNIs.
BT: Whether the demand for gold loans has increased due to the ongoing hike in gold prices?
George Alexander: Although customers will be eligible for a higher loan amount per gram of gold, gold price is not the only factor that directly impacts the demand for gold loans. However, we are witnessing a surge in demand driven by the revival in the economy, adding to the fact that the demand for gold loans is always need based.
BT: Is a gold loan cheaper than a personal loan?
George Alexander: When compared to a personal loan, a gold loan tends to have an average interest of around 15 per cent to 30 per cent. A personal loan from a bank may attract an average interest rate of 11 per cent to 30 per cent. However, for a personal loan a customer needs to have a CIBIL score, along with documentation like PAN and Aadhar card. Besides customers need to pay processing fees, appraisal charges and pre-closure charges as well. As for availing a gold loan, a customer does not need a CIBIL score. Further, there is none to absolute minimum documentation needed. Leading NBFC providers may not even ask for a PAN or Aadhaar card, but will just ask for proof of ownership of gold. Thus, a gold loan can be availed if a person does not have full KYC documents and does not have a credit history/ has a poor credit history. Besides, at Muthoot finance, we offer gold loans with zero processing charges, appraisal charges or pre-closure charges.
BT: How easy is it to take a gold loan?
George Alexander: Availing a gold loan at is a very simple task now. The first step involves visiting the nearest branch, or visiting our website, or downloading the iMuthoot application on one’s Android/iOS Application. We also offer Loan@Home services, through which our customers can avail our gold loans from the comfort of their homes. Incase a customer decides to visit a branch, our branch managers will take them through the process.
If the process is taken forward via the website, the customer can then use the gold loan calculator from our website to calculate the loan amount against the weight of the gold jewellery in grams. After filling out some required details, the loan amount that can be availed will get calculated. Then one needs to choose from a vast variety of schemes available for availing the loan. The customer can then fill the form and submit it. One of the company's expert executives will then get in touch with them in no time.
BT: Does a gold loan also include the value of diamonds in the jewellery?
George Alexander: The loan amount that is sanctioned to customers depends on the purity of the gold. The loan valuation excludes any precious stones or diamonds attached to the pledged jewellery.
BT: Does one get the exact jewellery back after paying off the gold loan?
George Alexander: A gold loan, like any other type of loan, can be repaid in monthly instalments for a tenure chosen by the customer, backed by an interest rate that is charged on the loan. Once the repayment of the loan amount along with the interest amount is completed, the customer gets back the exact gold ornaments pledged by them. At Muthoot Finance, we also provide the facility of part payment and part-release of gold jewellery.
BT: What happens if gold prices steeply decline or rise during the tenure of the loan?
George Alexander: We track the gold prices and consider any changes recorded in the past one month. In circumstances where the gold prices steeply decline, the customers are requested to repay part of the loan amount to meet the price fall or pledge additional gold ornaments to maintain the loan-to-value ratio. In case of surging gold prices, the borrowers can avail a higher credit amount.
BT: What points should one be aware of before opting for a gold loan?
George Alexander: An important factor when applying for a gold loan is that the customer does not need a CIBIL score, and there is none to absolute minimum documentation required. Leading NBFC providers in fact, may not even ask for a PAN or Aadhaar card for the same, but will require one to submit proof of gold ownership.
A customer should keep a few points in mind before opting for a gold loan such as safety of the brand from whom the gold loan is being taken, tenure of the loan, transparency in business, highest LTV (Loan to value ratio), quick TAT (Turnaround time), no CIBIL score involved, collateral is gold, check for interest rate, check for upfront charges like processing fees, appraisal charges or pre-closure charges.
BT: There are so many gold loan options available in the market. How to choose the right one?
George Alexander: A gold loan is one of the quickest and easiest ways of getting funds for personal requirements. However, as the gold jewellery is pledged for availing a gold loan, it is essential to choose the right service provider that you can trust with your gold ornaments. A customer should choose a reputed and trusted brand with pan-India presence.
Another important aspect to keep in mind is the security measures taken by the company to keep the customer’s gold safe. Muthoot Finance has deployed 7 layer sophisticated high security systems in place across all the 5000 plus branches to prevent any fraudulent activities.
If the customer is opting for an NBFC, the ratings and business legacy of the company is another thing to keep in mind before deciding on the service provider. Another important factor is to select a gold loan provider that offers a quick response time and simple documentation procedure when submitting an application for gold loans while looking out for the best interest rates. Each customer requirement may be different hence choosing a provider that provides flexibility and a variety of schemes available for gold loan can also be beneficial.
BT: How much is the interest rate on gold loans at Muthoot Finance?
George Alexander: The interest rate on gold loan varies from 9.9 per cent to 21 per cent as of now. At Muthoot Finance, there are no processing charges, appraisal charges or pre-closure charges.