There was a sudden change in gold rates during mid-may 2020, which also marks the start of the COVID-19 lockdown in India. The gold rates fluctuate at high speed. This also encouraged India to give up their gold pieces as collateral for money, to meet their current financial needs. Due to Covid-19 a lot of people lost their jobs and had to take loans to meet their everyday needs. And a gold loan was the best option when compared to a personal loan or credit card. Because for a gold loan, the interest rate is usually low, but during the lockdown, it has decreased a lot, the application process is a lot quicker, and you only need essential minimal documents. Whereas the interest rate and application process for a personal loan are pretty high.
You can quickly get money by giving your gold as collateral to banks and Non-banking financial companies(NBFCs). But due to this pandemic, a lot of factors of the gold loan were affected, and those factors are:-
1. LTV rate :- Loan to Value rate is the rate you get when you give your gold as collateral; earlier the LTV rate was 75-80%, so if your gold rate is INR 45000 so you would only get 33,750, but now RBI has increased the LTV rate to 90% so now you’ll get 40,500 for your gold. But no bank gives a 100% LTV rate.
2. Interest rate :- The interest rate has decreased a lot. It was 8.50% before, but some banks like Muthoot gold loan are giving loans at 7%, well a lot of banks are giving loans at 7% now, but you’ll have to do your research and compare each factor to find your perfect lender.
3. Tenure :- Due to this pandemic, the country is facing financial issues, so many people cannot pay the whole principal amount with interest, so that’s why banks have decided to increase the period to pay back the amount. Due to which banks are forced to invest more in security equipment like CCTV cameras, Biometric scanners, Strong doors and alarms.
4. Repayment :- Banks have allowed flexible payment due to this pandemic. You can pay annually, quarterly, semi-yearly or you can pay interest every month and the principal amount at the end.
Reasons to apply for a gold loan during COVID-19:-
1. Minimum documents required, and the process is quite fast.
2. It is the most secured loan when compared to a personal loan.
3. The money is not being monitored; once you get the money, you have the flexibility to use it however you want.
4. You are not asked for other collateral or security, but if you want to lower your interest rate, you can add any other asset for collateral.
5. The interest rate is quite low.
6. Gold loan is the perfect way to raise capital and use funds whenever you're in need for money.
Now the real question is how can you apply for a gold loan:-
1. You can request a door step evaluation for your gold. When you request this, a bank executive will visit your home to check the gold value and decide on the rate. And if you both agree with the credit amount, you can go ahead with it and provide all the minimum documents required. The money is then transferred to the customers account shortly.
2. You can visit a bank branch and have a conversation with the bank manager regarding the interest rate, repayment options, LTV rate and tenure. And if you both agree with the terms, you can move ahead with it. Customers usually get the money on the spot.
3. You can apply for a gold loan online, where the process is straightforward compared to the offline method, and then you can move ahead with it.
Also Read:- How CIBIL score gets help from Gold Loan