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Stringent rules for education loans turn parents towards gold loans

The recent surge in gold prices has made the yellow metal shinier as it fetches more funds for borrowers. Significantly, gold prices shot to Rs 60,000 per 10 grams from about Rs 50,000 a year ago

Illustration: Binay Sinha

Illustration: Binay Sinha

BS Web Team New Delhi

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With the college admission season around the corner, non-banking financial companies (NBFCs) have registered a 10-15 per cent rise in gold loans, The Economic Times (ET) reports. 

The demand for gold loans is especially high in tier-2 and tier-3 cities. In most cases, the loan applications are from people who want to secure a seat in a lesser-known college for their children, the report said.

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It should be noted that getting education loans to study in lesser-known colleges is tricky, and this may be the reason why people are approaching NBFCs for gold loans.
 

Apart from this, applying for a gold loan is easier and does not involve the complexities of applying for a proper education loan which involves several steps and may take more time. 

The recent surge in gold prices has made the yellow metal shinier as it fetches more funds for borrowers. Significantly, gold prices have shot to Rs 60,000 per 10 grams from about Rs 50,000 a year ago.

CEO of Ruloans Distribution, Kaushik Mehta, was quoted in the report as saying, “Education loans involve certain procedures and require the submission of paperwork, making it a somewhat lengthy process. This can deter people from pursuing this avenue for funding.”

In contrast, applying for gold loans is convenient and allows quicker access to funds, he said. Gold loans are especially popular for education loans since they do not require a credit history.

An industry expert said that the stringent eligibility criteria for education loans ensure that such loans are only approved for well-recognised colleges and universities.

Another NBFC focused on gold loans, Muthoot Finance, has also seen a rise in demand for gold loans from younger applicants, the ET report said.

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First Published: May 31 2023 | 11:03 AM IST

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