Are long-term gold loans in demand?

With yellow metal prices hitting record high long-term gold loans appear to be in demand. Individuals and small businesses are seeking to raise money as the pandemic hit their regular income flows.

Kerala-based Indel Money, a non-banking finance company launched the first long-term gold loan in the country with two-year tenure, a loan product that aims to garner business amid an economic crisis.

“Our long-term gold loan saves customers from this hidden trap,” said Umesh Mohanan, executive director and CEO, Indel Money. You don’t need to re-pledge or jump the interest slabs here.”

“Customers end up paying higher interests by repledging the gold after the short periods of 90 days or 120 days,” he said.

Traditionally, gold loans have always remained a short-term or bridge loan facility.

Indel Money’s two-year gold loan carries an interest rate in the range of 12-24 per cent. The gold loan helps customers retain their ownership of the gold pawned.

It dispenses with the tradition of auctioning the pledged gold if loan repayment obligations are not honoured by the customers within the stipulated tenure, the company said.

“This product ends the age-old practice of auctions and makes sure that customers enjoy the ownership rights with a transparent interest structure,” said Umesh.

Indel aims to take the assets under management to over Rs 1000 crore by the end of the current financial year that will end on March 31, 2021 from Rs 450 crore now.

Besides gold loans, Indel Money offers MSME loans, small business loans and consumer durable loans across southern states including Kerala, Karnataka and Tamil Nadu. It has 169 branches.