Gold Loan Renewal Risks Hidden in Falling Prices

Renewing a gold loan may seem like an easy way to avoid arranging fresh funds immediately, but it's not without risks.

The value of the gold pledged as security is linked to market prices. If gold prices fall, the value of the jewellery pledged with the lender also falls, leaving borrowers vulnerable to increased loan-to-value ratios.

Lenders may demand more money or collateral at renewal if the LTV ratio moves outside permitted levels.

Borrowers should check gold valuation and repayment ability before renewing a gold loan.