Gold has always carried emotional value in Indian homes. Earlier, families pledged jewellery only during serious situations like medical emergencies or financial crises. However, this mindset is changing rapidly across India.
According to Experian India’s Manish Jain, gold loans are no longer limited to difficult times. The demand for gold-backed loans has increased by 80 to 85 percent. Today, young people and middle-class families see gold loans as a practical financial choice.
Gold loans gain popularity among new borrowers
Earlier, people believed only older citizens or lower-middle-class families used gold loans. However, the current trend shows a different picture.
Now, people from small towns and big cities are using stored gold for borrowing. Even young professionals and high-income groups consider it an important financial planning tool.
Moreover, gold loans offer a simpler process compared with property-backed loans. Home or property loans often require longer procedures and documentation. Therefore, many people prefer gold loans for short-term financial requirements.
Changing rules pushed lenders towards gold loans
Meanwhile, market regulations also changed borrowing patterns. Earlier, several small fintech companies offered unsecured personal loans with interest rates between 30 and 40 percent.
However, regulatory authorities tightened rules around unsecured lending. Digital lending guidelines also became stricter. Consequently, lenders and fintech firms shifted towards secured loan options.
Gold loans emerged as a preferred choice because lenders consider them safer. Companies believe secured loans carry a lower risk of repayment loss.
Borrowers need caution while taking top-up loans
Although gold loans provide easy access to money, they also carry risks. Many customers repeatedly take top-up loans against their pledged gold.
Instead of clearing the original amount, borrowers often extend their debt cycle. As a result, they remain dependent on continuous borrowing.
Therefore, customers must understand that a loan works best when they repay it on time. Timely repayment helps them recover their pledged gold.
Understanding EMI planning remains important
Young borrowers often miscalculate their repayment ability. Many assume higher salaries allow them to handle bigger EMIs easily.
However, large repayments can reduce savings for household needs and sudden medical emergencies. A strong credit score does not mean taking loans beyond financial capacity.
Additionally, proper financial planning helps borrowers gain real benefits from gold loans or other credit options. Credit reporting has also improved, allowing companies to quickly check existing debts of customers.
