What factors affect the interest rate for a Gold Loan?

The key factors that impact gold loan interest rates are:

• Demand and Supply: Gold prices depend on demand and supply dynamics. When demand is higher than supply, gold prices rise, leading to lower interest rates.
• Economic Situation: A negative economic scenario leads to higher gold demand as investors see it as a hedge against inflation. This allows borrowers to get lower interest rates.
• Domestic Gold Prices: Interest rates are inversely related to domestic gold prices. Higher gold valuation leads to lower interest rates as pledged gold is valued higher.
• Purity of Gold: Higher gold purity attracts lower interest rates compared to lower-quality gold.
• Loan Amount: Gold loan providers may offer lower interest rates for higher loan amounts, given higher business potential.
• Loan Tenure: Short-tenure loans attract lower interest rates compared to longer-tenure loans spanning years.
• Credit History: Existing customers with good repayment track records may get lower interest rates on new gold loans.
• Location: Interest rates vary across urban, semi-urban and rural areas based on demand and competition.