Instant gold loans via UPI: How technology is making borrowing faster

Instant gold loans via UPI: How technology is making borrowing faster

What are UPI instant gold loans

Gold loans are secured loans in which individuals keep gold ornaments or gold coins as collateral to borrow funds. Earlier, there were individual bank and NBFC visits, gold estimation, document verification, and finally loan disbursal. Now, with UPI-based gold loans, all of this is technically done on auto-pilot. Borrowers can apply, get their gold estimated, and get funds in effectively no time using the UPI mechanism, which is faster and simpler.

How it works

To obtain an instant gold loan via UPI, lenders get enrolled with a concerned participating NBFC or bank that provides this facility. The borrower physically hands over the gold at a branch or selected locker to ascertain its valuation. After verification, the lender creates a loan account on the borrower's UPI ID. Once the loan is approved, the loan amount is credited instantly to the borrower's account via UPI. The entire process reduces paperwork, speeds up disbursal, and offers the convenience of lending even to customers who may not have immediate access to physical outlets.

Advantages of UPI-enabled gold loans

The greatest advantage of this facility is quickness. Traditional gold loan disbursal would take days or hours but UPI-based disbursal can be done in minutes. It is also more transparent, with lenders made aware in real time on approval and fund transfer through UPI intimation. There is also greater accessibility, especially for those in semi-urban and rural areas where visiting a branch is a hassle. Additionally, digital documentation ensures greater convenience to track loan details, repayments, and interest, reducing disputes and misapprehensions.

Things to remember before applying

Although UPI gold loans are easy and fast, the borrower must watch out for interest rates, loan-to-value ratio, and repayment dates. The size of the loans is typically a percentage of the market value of the gold and may vary among different lenders. Interest rates also differ based on the lender, purity of gold, and loan tenure. The borrower must keep a watchful eye on the redemption process of gold at the time of repayment of the loan. Timely repayment is necessary to avoid penalty and potential loss of pledged gold.

Future of gold loans with UPI

Digitalisation is transforming the landscape of financial services, and UPI-based gold loans are bound to become the new normal and more popular. This acceptances comes as a benefit to lenders as well as borrowers with savings in turnaround time, improved customer convenience, and reducing cost of operations. With the development of technology, we may see doorstep gold valuation and instant sanctioning being part of these services, further enhancing gold loans as an increasingly popular short-term credit option.

FAQs

1. Is it possible to take a gold loan instantly without having to go to a branch?

Physical validation of gold is mandatory at present but loan disbursal is instant via UPI. Some lenders will provide doorstep valuation in the future.

2. How is the loan-to-value  ratio for UPI-based gold loans?

It differs from lender to lender but usually ranges from 60% to 75% of the market value of the gold.

3. Is the rate of interest for UPI gold loans greater than that for traditional gold loans?

Not necessarily. Comparable rates, but customers need to compare terms with the lender as they can vary depending on the platform and processing speed.