How Changes in Gold Prices affect Gold Loans
No matter how foolproof one’s financial planning is, there can be some situations when some kind of financial aid is required. And, availing a loan is one of the easiest ways to meet those urgent fund requirements. However, there is a widespread misconception that taking a loan is not good for your finances. The truth is that a loan can help you get over a temporary financial crisis with ease, only if those funds are used appropriately. In today’s time, there are several different types of loans available, with gold loans being the most viable of them. This is a type of secured loan that you can avail for several purposes, such as business expansion, educational expenses, travel, or something else.
●Quick Loan Disbursal
●Lower Interest Rates
●No External Collateral
●No End-usage Restrictions
●Flexible Eligibility Criteria
Now that you know how availing a gold loan to arrange funds can prove to be a smart move, let’s talk about how the market rate of gold affects gold loans:
The Relation between Gold Prices and Demand for Gold Loans:
There is no denying the fact that the demand for gold loans depends heavily on the market price of this precious metal. When you apply for a gold loan, the loan amount that can be sanctioned is decided by taking certain factors into consideration, such as the weight of the ornament, gold purity, and the current market rate of gold. The fluctuations in the market rate of the metal play an important role in calculating the baseline value of the gold loan amount. The LTV (loan-to-value) ratio is the specific percentage of your gold’s value that you can obtain as a loan. Whenever there is a fluctuation in the gold rate, the LTV ratios of gold loans also get affected.