Get Access To Quick Funds With Gold Loan During COVID-19


Covid-19: Indians taking loans against their household gold for more than once - The Economic Times

The financial emergency comes uninvited and the covid-19 outbreak has made living life difficult for many. The global health crisis has attacked many people due to which they had to be admitted to the hospital, for which they required money and otherwise, the global pandemic resulted in job loss, salary cuts and the state of the economy continues to fall. In such cases, people had no option other than reaching banks and Non- banking Financial Companies for a loan. Many banks also introduced loans which were specially designed for the coronavirus time, they are called covid loans. However, the gold loan was high in demand during this let’s understand it in detail:-

What is a gold loan?

 A Gold loan is a secured loan which is taken by a borrower when he/she need funds in an emergency. When a borrower takes a loan, then he/she has to pledge their gold jewellery, which is in a range of 18-24 carats. Only gold jewellery can be pledged as security, gold bar or gold coins cannot be treated as collateral. A borrower gets up to 80% of the loan amount which is based on the current value of the gold.


Why gold loan during difficult times?

Gold loan is a preferred option for many in difficult times, around 80% of the customers of banks and NBFCs opted for gold loan during a pandemic. Here are the reasons why the gold loan was everyone’s choice who was in need of money:-

  • Gold prices were high– In the amidst of pandemic, gold prices have been high for ages. India is considered the second-largest consumer of gold after China and it is known that when the crisis happened in the world the gold prices has gone high. In the domestic market, the gold price saw a growth of 38%, which highest of its time. The yellow metal’s price reached Rs 55,000 per 10 gram during the covid-19. Higher the price means that the loan amount will also be high. The loan amount is decided on the current market value of gold.


  • Lower interest rate- The gold loan is offered at a lower interest rate when compared to other loans available in the market. This is because the gold loan is a secured loan and lender can trust the borrower for his/her trustworthiness as they already have borrowers gold jewellery as collateral.
  • Flexible tenure- Gold loans are very flexible, they can be custom made for a borrower. A borrower can choose the interest rate, whosoever is offering a lower interest rate and can also decide on the loan amount. A borrower can decide whether they want to repay the amount in a week or 36 months. However, NBFCs also offer a facility where a borrower can repay the loan at any time without paying foreclosure penalties. 
  • No credit score required- If a borrower does not have a good credit score then also, he/she can get a gold loan. As we have already discussed that gold loan is a secured loan and jewellery is treated as a security which will be auctioned if the borrower defaults to pay the loan. A credit score is a score which ranges between 600-900 and it indicates the creditworthiness of a borrower. A borrower with a good credit score easily gets a loan, while a borrower with bad credit might face some issues and generally they get a loan at a higher interest rate. However, a credit score is not a main eligible factor in a gold.
  • Minimal documentation required- When one applies for a gold loan, he/she has to submit a few of the basic documents like identity proof, address proof and KYC documents. A borrower is not required to submit any income proof like bank statements or Income tax return forms.
  • Processing time- The loan disbursal time is a few hours in the gold loan. As there is no need for a credit score, which actually means that lenders are not concerned about the creditworthiness as they do have borrower jewellery as collateral. Due to this reason the bank disburses the amount within a few hours if all the paperwork is right. 


Bottom line: So, now if you need finances urgently and you have gold metal stored in your locker then you must make use of it, but you must make sure that you repay the loan amount on time and lenders don’t have to sell off your jewellery. 


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