The Gold Loan Market: United Kingdom versus India
Borrowing against gold jewellery has been a fairly expensive proposition in the UK. Yes, there are many tempting offers from bullion dealers and cash for gold institutions offering cash to buy gold, but the lending rates on them are usurious. High street pawnbrokers charge 5% to 10% a month for taking a out a gold loan.
This will come as a surprise to those who are familiar with the Indian market. Gold loans in India are offered at rates close to bank rates, only marginally more than mortgage rates by mainstream financing companies, both private and state-owned banks and specialist non banking financial corporations. No wonder then the gold loan market in India have grown at more than 50%+ per annum over last few years. A Reserve Bank of India (India's central bank) report estimates that the gold loan market in India is worth more than $25billion.
Much like the UK, the traditional Indian pawnbrokers also charged usurious rates. But with Gold being possessed by every Indian household, there existed significant demand and the organised sector stepped in. Today most of the private and state controlled banks offer gold loans and some sources suggest it is the fastest growing and most profitable segment of their loan book.
A report by the Reserve Bank of India on Gold Loans by NBFCS in 2013 specifically recommended that banks extend their gold jewellery loans to improve economic inclusion, and reduce the reliance on pawn brokers and other money lenders.
"... There is great scope for expanding financial inclusion in extending gold jewellery loans. If banks continue to increase their gold jewellery loans portfolio, the reliance of economically weaker sections of the society on money lenders and pawn brokers will come down considerably. Banks may make the gold jewellery product more flexible and encourage people to avail this fully collaterilised loan. Banks can also devise customised gold-lending facilities on the lines of gold loan NBFCs, which are providing many variants in the gold loans. This greatly facilitates monetisation of huge stocks of gold in the country.. "
With increasing number of UK resident now investing in Gold and the increasing wealth and population of British Asians, the UK market today is crying out for a gold financing solution, very much in the mould of the Indian market.
We at Unbolted are attempting to revolutionise the process of borrowing against your gold by bringing in the skill sets and knowledge of the organised sector. With Unbolted, you can borrow 80% of the value of the gold, starting at 1.25% a month. Click here to learn more.