Parents turn to gold loans to fund children's college studies

As the college admissions season sets in, gold loan non-banking financial companies (NBFCs) are seeing a 10-15% year-on-year increase in demand from customers in tier-2 and tier-3 cities who want to take loans for getting their children admitted to colleges which are lesser known and for which banks may not easily give educational loans.

Besides, getting gold loans is easier and many customers want to avoid the procedural methods involved in getting educational loans. The recent rally in gold prices is also driving the demand as borrowers can get more money by depositing lesser household gold with gold loan companies. Gold prices have increased to '60,000 per 10 grams from '50,000 per 10 gm a year ago.

"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," said Kaushik Mehta, CEO, Ruloans Distribution. "In contrast, gold loans are convenient and provide quicker access to funds. Consequently, individuals often perceive gold loans as a better option for financing education."

Gold loans score over education loans in particular because they don't require a no credit history and there is no end-use restriction either.

"Moreover, thanks to stringent eligibility criteria, education loans are usually granted to students from recognised colleges and universities. Education loans also don't cover out-of-pocket expenses such as travel and accommodation, etc," said Umesh Mohanan, CEO, Indel Money.

"As gold loans don't come with any such restriction, we are witnessing a steady demand growth for gold loans from families during the onset of academic sessions in educational institutions."

Muthoot Finance, one of the leading gold loan NBFCs in the country, has also observed an increase in demand for gold loans from youngsters.