The gold loan industry has grown tremendously in the past few years. As per Livemint, an 11.64% increase in the search for gold loans has been recorded in 2023. It showcases a huge shift in the demand and supply curve.  Many factors contribute to the rise in demand such as easy availability of the loan, gold price appreciation, lifestyle inflation, and more.

The Current Market Trends of Gold Loan

According to the Reserve Bank of India (RBI), up to 75% of the total gold value is considered acceptable. It means the lender can give up to 75% loan on the gold articles kept collateral by the borrower. One can use an gold loan calculator to know the loan amount they can avail of from a gold loan provider.

Today, other than banks, non-banking financial companies (NBFCs) offer lucrative loan offers to borrowers. The rate of interest on gold loans varies from lender to lender. However, NBFCs have favourable interest rates in comparison to traditional banks. As per the recent reports by Statista, 61% of the gold loan market share comes under the NBFC umbrella.

The Future of Gold Loan Interest Rates

1. Impact of Gold Prices on Interest Rates

Currency exchange value, global economic trends, and inflation are some common reasons for the fluctuation of gold prices. There is a snowball effect of gold prices on the gold loan rate of interest. Borrowers can get higher loan amounts when gold prices increase and vice versa. In recent years, gold prices have gone up and it is expected to continue this trajectory in future.

2. Impact of Policy Changes on Interest Rates

The Indian financial lending market is highly regulated by RBI. It is done for risk mitigation. Hence, the repo rate has a great impact on the interest rates. When the repo rate increases, the gold loan lending rate also increases. The RBI has increased the repo rate in the current year which can affect the gold loan lending market in future.

3. Impact of Inflation on Interest Rates

Historically, it is seen that gold has become a safer investment in case of an economic downturn. So, it has an inverse relationship with inflation. As the yellow metal gives a hedge over inflation, its demand increases and so does its price. As a result, the lenders adjust the interest rate on gold loans.

Policy changes, gold price fluctuation, and geo-political variables play huge roles in the gold loan interest rates. As these factors are favourable in the current market scenario, borrowers can get great deals. Gold loan is one of the easiest and quickest ways to get immediate funds.

When taking a gold loan, one must consider several factors to get the best loan offers. Taking loans from established banks or NBFCs is a great way to get the best loan schemes. Top lenders offer features such as an at-home loan facility, pledged gold security, a pre-closure facility, and more. It is important to check all the points along with the interest rates before taking a gold loan.