The Power of Gold Loans: How gold loans can transform financial realities

financialexpress.com:

If you are in need of money and want to borrow from others, everybody prefers to have gold as collateral. The reason is very simple. For the lender, gold is an appreciating asset. For the borrower, the yellow metal offers high liquidity and it provides an instant loan.

India is the world’s second-largest consumer of the precious metal. Most women inherit a certain amount of gold from their families. According to an RBI study, Indian households carry more than 27,000 tonne of gold. As a result, gold loan has emerged as the safest route for women to avail emergency funding. Credit bureau CRIF High Mark’s report says women availed 42% of gold loans in 2022. In most cases, women, especially homemakers, may not have reliable credit score to avail personal loans. Naturally, the precious metal will act as an emergency creditline to them.

When we examine the price movements of gold in the past decades, the metal has shown the trend of constant appreciation. In 2023, the metal gave a risk-free return of 13%, which is higher than any other fixed-income securities like bank FD and PPF. In dollar terms, gold gained 13% in 2023 and in rupee terms gold futures appreciated 15% on MCX.

Also Read: Credit Scoring System: How credit bureaus make money off your financial issues and haunt your future

Gold has, on an average, returned 11.2% in the last 20 years, according to a study by fintech company Smallcase. The precious metal has shown a consistent positive performance over the past 20 years, with only negative returns observed in 2013, 2015, and 2021. It performed exceptionally well in 2011, with the highest return of 30.7%. In 2010, 2019 and 2020, the yellow metal registered a growth of 24.8%, 21.3% and 28%, respectively.

This