With the strong belief in Indian culture that buying yellow metal during festive occasions brings good luck and positivity, it is no surprise that the gold prices in India have increased this Ganesh Chaturthi.
The rise in gold prices has a significant implication for not just gold buyers but also those with existing gold loans or those planning to take one soon.
There is no doubt that gold has been a major financial asset in Indian households. Gold loans help access its value, especially during emergency scenarios, be it medical, educational or business purposes.
However, now that gold rates have gone up, how does it affect your gold loan interest rates? Dive into the latest trends!
Real Reason Gold Prices Are Higher This Season
As per the latest updates, the gold rates are as follows:
| 22-carat gold | ₹94,050 per 10g |
| 24-carat gold | ₹1,02,600 per 10g |
Note: These are gold prices in Bangalore as per latest official updates. Prices may vary as per cities and retailers.
This can be linked to the increasing domestic demand for gold this Ganesh Chaturthi and with Diwali around the corner as well. However, the surge in prices can be a double-edged sword for consumers. That is, individuals who already own gold can sell at a greater value. Whereas, for those who are buying gold for festive or wedding purposes, the high prices are a challenge to deal with.
Now, let’s understand how it affects gold loans.
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The Direct Impact of Rising Gold Prices On Gold Loan
To begin with, it is important to understand that the value of your gold loan is directly linked to the current market price of gold. Here’s how it works:
- If the gold prices are high, that means you get a higher loan amount. This is because the value of your pledged gold increases. Banks and NBFCs can therefore offer you a higher loan amount for the same jewelry.
- If the gold prices decrease, your gold value also lowers. This results in a smaller loan or you may be requested to provide extra security.
- As per RBI rules, lenders can give a maximum of up to 75% of the gold’s value as a loan. This is referred to as the Loan to Value ratio or LTV. So, your loan eligibility basically moves up or down as per gold prices.
- Individuals with existing gold loans can be eligible for a top-up loan. That is, if gold prices have gone up, the value of your pledged gold also increases.
In this case, you can contact your lender to check if it is possible to get an additional loan on the same gold.
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What Are The Potential Risks Involved?
Although the current trend in gold prices might seem favourable for taking a gold loan, the market is mostly unpredictable, here’s what you need to keep in mind.
- Changing gold prices: Gold rates can go high and low based on local and global factors. In case the prices go low after you take the loan, the value of your pledged gold decreases. The lender may then ask you to make the partial prepayment or pledge additional gold to balance the loan.
- High interest rates: Gold loans generally have low interest rates compared to unsecured personal loans. Yet, if you miss your EMIs or make delayed payments, the interest rate are bound to go up, making repayments more expensive!
- Hidden Charges: Some lenders may offer gold loans with processing fees. And when you miss payments, there might be penalties as well. This can increase your repayment burden if you don’t check the terms first.
- Auction Risk: Since gold always holds significant value., if you fail to repay on time, your pledged gold may be put for auction. This further adds up to the financial strain and stress.
Choosing the right lender is also important. With new gold products being launched frequently and the changing gold rates, it is important to find the right lender when applying for gold loans. You can do this by comparing multiple.
lenders, including their interest rates, repayment options and transparent terms.
Here’s a simplified approach.
At the loan aggregator platform Buddy Loan, you can apply for gold loan by comparing a wide network of verified lenders under one roof. It provides affordable interest rates based on your financial profile and comes with a simple application process. You can also check your eligibility, including credit score and calculate EMIs via its gold loan EMI calculator.
Conclusion
This Ganesh Chaturthi, as we seek the blessings of Lord Ganesha, the rise in gold prices opens up a meaningful financial opportunity for gold owners. The higher value of your gold can be used to secure a bigger gold loan, helping you manage festive expenses, clear debts or fund personal goals with ease.
At the same time, it is important to choose a reliable lender, understand the terms clearly and be mindful of potential risks.
With Diwali just around the corner, making wise financial choices now can set the tone for a truly bright, prosperous and stress-free festive season ahead.
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