BUSINESS-ECONOMY
Amid financial tightening in the market, an intense surge has been witnessed in the demand for gold loans as the gold prices keep rising and access to unsecured credit keeps getting tightened. In India, gold loans soared by 51 per cent in the month of September, whereas personal loans grew by 11.4 per cent. In this uncertain financial climate, as borrowers continue to seek gold-backed loans, the question arises: how good is it as a collateral-based and reliable alternative? Explaining this surge in demand for gold loans over personal loans, Founder of Radian Finserv Sumit Sharma said, "The surge in gold loans compared to personal loans can partly be attributed to a tightening of credit in the personal loan and credit card space. In such environments, consumers typically shift towards more accessible and collateral-backed options, with gold loans emerging as the preferred alternative, demonstrating a clear instance of credit migration." Also Read: Money-Wise: Planning to invest in gold? Here's why you should ditch physical and go for digital "Moreover, the recent increase in gold prices has played a key role in enhancing Loan-to-Value (LTV) ratios, which now ranges between 60-62%. This higher LTV provides a greater cushion for both lenders and borrowers, further making gold loans an attractive option," he said. Sharma said that the growth may also have been driven by the rise in the value of gold, as the remaining growth stemmed from an increase in loan volumes. Watch: Is Bitcoin Turning Into A Store Of Value Like Gold? "When access to microfinance or personal loans is limited due to tightened disbursements, individuals are more willing to leverage their available gold to unlock its value. This shift underscores the growing appeal of gold loans as a practical solution, offering borrowers the flexibility to meet their financial obligations while minimising the risks associated with unsecured borrowing," he said. For those planning to seek gold loans in future, Sumit Sharma, Founder of Radian Finserv, explains how it can prove beneficial for borrowers and whether you should go for it or not. Prisha is a digital journalist at WION. With almost 10 years of experience in international journalism, she majorly covers political and trending stories. She also f None
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