Explained: Why this might be the best time to take a gold loan?

When gold prices increase, more people are likely to utilise gold as collateral for loans.  As a result, loan ticket sizes rise, resulting in loan growth for gold financiers. The bigger ticket size benefits both the lender and the borrower.

"The borrower can get more money by guaranteeing the same quantity of gold, while the lender can increase their loan portfolio," Arora told CNBC-TV18.com.

Explaining the benefits of gold loans, Arora further said that they offer higher loan-to-value (LTV).

The value of the gold deposited as collateral determines the amount of the gold loan. At the moment, banks offer a loan to value (LTV) of 75 percent, whereas other financial service providers lend up to 60 percent.

In other words, if the gold is worth Rs. 1 lakh, the person can get a loan for Rs. 75,000.

The rising cost of gold may be another factor. In India, the cost of 10 grams of 24-carat gold has surpassed Rs 60,700. A higher value for the gold pledged and a higher loan amount from lenders could arise from high prices.

"When compared to personal loan interest rates, gold loan interest rates are unquestionably on the lower end. Compared to other financial products, like personal loans, which have much higher rates, gold loans have lower interest rates. Interest on personal loans typically ranges from 16-25 percent annually. For gold loans, the annual interest rate is as low as 7 percent," Arora told CNBC-TV18.com.

Several banks are currently offering gold loan schemes at comparable rates. Thanks to net banking and other internet-based facilities, borrowers can get the credit transferred almost instantly in case of gold loans.