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What is a gold loan?

You can avail a loan from a bank or an NBFC by pledging your gold. You can pledge your gold coins or gold jewelry and avail a gold loan from a bank. The gold has to be of purity 18-24 carats.

You can pledge only gold jewelry to avail a gold loan from an NBFC.

The amount of loan you avail

In India tradition demands that gold be collected and accumulated in the family. This means you can easily avail a gold loan with this family gold. You get an LTV (Loan to value) ratio of 75%.You get INR 75 for every INR 100 you pledge.

Why avail Gold Loan?

Low Interest

Gold and gold jewelry kept as collateral, mean lower Interest rates compared to a Personal Loan. Processing time is very quick.

No Credit History

Banks do not ask for income and salary proof. Unemployed persons can also avail a gold loan. Banks do not check credit history.

High Margin

A borrower gets up to 75% of the value of the gold or gold jewelry, pledged for the loan in case of an NBFC.


Easy Repayment

You pay only the interest on the loan amount borrowed. Principal repaid at the end of the tenure.

Key factors to consider for Gold Loan

Rural areas

If you reside in a rural area you can easily avail a gold loan from an NBFC (Non Banking Financial Company).

The documentation is much faster if you avail a gold loan from an NBFC rather than a gold loan from a bank.

Remember: The NBFC charges you a higher rate of interest on the gold loan than a bank. The interest charged by the NBFC could be around 22-24%.

Another benefit you get from availing a gold loan from an NBFC, is you have to only pay the interest amounts regularly on the gold loan.

You pay the principal (Borrowed amount) back, at the end of the term (tenure of the gold loan) and reclaim your pledged gold jewelry.

There are no processing charges and pre payment penalty, if you avail a gold loan from an NBFC.


Concepts & FAQ's Gold Loan

What is Gold Loan?

Banks and NBFCs give you loans against gold. Borrowers can pledge gold coins or gold jewelry and avail a gold loan. The purity of gold has to be between 18-24 carats.

Gold Loan is a product designed to provide liquidity against gold ornaments without having to sell them. Gold ornaments lying idle can be put to better use by availing loan against gold ornaments.

Gold Loan will be sanctioned on submission of all the required documents and satisfactory assessment of gold ornaments. Typically, Gold Loans have tenure of one year. This can be further extended.

Features of Gold Loan given by Banks

  • A bank sanctions a Gold Loan for a maximum of up to 60% of the value of gold.

  • Banks charge EMI for repayment of Gold Loans.

  • Banks charge lower interest rates than NBFCs.

  • Simple documentation and fast processing.

  • Overdraft limit varies depending on the market rate of gold.

Features of Gold Loan given by NBFCs

  • No EMIs. Borrower has to pay interest till they repay the loan, after which, the borrower will have to repay the principal.

  • A borrower can avail a Gold Loan for a maximum of up to 75% of the value of gold.

  • NBFC charges a higher interest rate on Gold Loan than a bank. It could be around 22-24% a year.

  • Interest rate is payable only on amount of the overdraft that you use.

  • Overdraft limit varies depending on the market rate of gold.

  • Simple documentation and faster processing compared to banks.

  • There are no processing charges and pre-payment penalty.

  • To avail a gold loan from an NBFC, a borrower can pledge only gold jewelry and not gold bars or coins.

Eligibility for Gold Loan

  • The borrower should be in the age group of 18-65 years.

  • Maximum age of applicant at loan application should not be more than 65 years.

  • The purity of gold ornaments should be 18 carats and above

  • The Gold Jewelry should be owned by the borrower or any of the family members.

Advantages of Gold Loan

  • No income proof is required to apply for a Gold Loan.

  • Banks don’t check credit history to grant Gold Loan.

  • Gold loan has less documentation.

  • Gold Loan interest rates are low as compared to personal loans.

  • Agricultural loan against gold is available for an agriculturist at a nominal rate of Interest of 7 - 8% per year.

  • In case of NBFC, borrower will have an option to pay only interest during the tenor of the loan. At the end of the tenure, the borrowed amount is to be repaid in a single shot.

  • Gold Loan takes less processing time.

  • Gold Loan has nominal processing fee or no fee at all.

Documents required For Gold Loan

  • Passport

  • Voters ID

  • Driving license

  • Electricity bill, ration card, telephone bill

  • 2 passport size photographs

Types of Gold Loans

Based on the purpose of lending, Gold Loans are categorized into various schemes. Agricultural Gold Loans offered to farmers and agriculturists are at a lower rate of interest.

1.Agricultural Gold Loans:

Agricultural Gold Loans are loans granted to farmers and agriculturists against gold ornaments, to fund their crop production and investments in agriculture and allied activities. Key Features of such loans are:

  • Evidence of farming like land records.

  • The purpose of the loan given in writing by the borrower.

  • Maximum loan tenure is 3 years.

  • Banks offer options of an overdraft facility.

  • Interest rate ranges from 8 - 10%.

2.Non Agricultural Gold Loans:

All loans extended to borrowers other than farmers and agriculturists are called non-agricultural Gold loans. The features of non-agricultural gold loans have been explained under the loan schemes by repayment options.


Gold Loan Repayment Schemes

Banks may offer you the facility to repay a Gold Loan in the following ways:

1. Bullet Repayment:

Under the Bullet Repayment Scheme, banks and NBFCs offer borrowers an opportunity to repay the entire principal amount at the end of the tenure, in a single shot. This scheme is suitable for loans with a short tenure.

2. EMI Scheme:

Under the EMI scheme, borrowers who avail gold loans are required to pay monthly installments or EMIs to banks. This scheme is suitable for gold loans of a higher tenure with larger loan amounts.

3. Overdraft Scheme:

Overdraft Scheme is designed for businessmen and self-employed people, whose need for funds keep on fluctuating. Under this scheme, a borrower can withdraw funds or deposit surplus amounts in an overdraft account, during the loan tenure, within a pre-approved credit limit. Interest is charged on the utilized amounts only.

What happens if gold prices fall during the tenure of the Gold Loan?

It is a general notion that gold prices are always on the higher side and will not fall drastically. However, like every commodity, gold prices do fall. A maximum Loan To Value of 75% of the gold pledged is granted as a Gold Loan in case of NBFCs. As gold prices are not constant, banks are required to maintain the Loan To Value (LTV) consistently.

In case of decline in gold prices, banks may:

  • Ask for more collateral or gold to maintain the LTV.

  • Ask the borrower to partly pay a nominal amount towards the principal.

  • If the borrower defaults, the gold may be auctioned after sending notices and reminders.

Thinking of buying a Gold Loan ?

To be absolutely sure of WHAT TO LOOK OUT, talk to on the phone for FREE financial consultation.

Expert Financial Advisors from would provide you unbiased, correct and up to date information so that you can make an informed financial decision.

Frequently Asked Questions

Do I have to pay any additional fee?

Nominal processing fees, as applicable, is payable at the time of disbursement of loan.

How much time will it take for my loan to be approved?

Normally it takes maximum 1 day from the time of filling application form for the loan to be disbursed.

Can I partially repay the loan?

You can make part-payment but the ornaments will be released only after the entire outstanding amount is repaid.

Can I prepay my loan?

Yes, the loan can be prepaid without any prepayment charges.

How do I repay the loan?

You can repay the loan by cash, cheque, DD or funds transfer from an account. The ornaments would be released on realization of money by the Bank.

If I am unable to pay interest on time what are the penal charges?

In the case of default in repayment, penal interest (as the case may be) will be charged around 2% per annum over the normal rate of interest.

What is the period after which gold will be auctioned in case if I am unable to pay the EMI?

The gold will be generally auctioned between 6-15 months after exhausting all means of recovery. However it changes from one bank to another bank depending upon their loan policies. To know more about Gold Loan, call us on 080 67974000


Gold Loan Articles

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Gold Loan News

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How to Get Gold Loan?

Wednesday, August 29, 2018, 8:16 PM

Gold loan is sanctioned by accepting the gold ornaments of the customer as pledge. Personal loan is sanctioned on the basis of source of income and repayment capacity of an applicant. It is true that Gold loans, like personal loans or credit card borrowings, are often used for short term household requirements.

What do know about Gold Loan and its Process?

Tuesday, July 31, 2018, 10:36 PM

When a customer-pledges gold as collateral for taking a loan, it is known as a gold-loan. Gold-loans are short-term loans and the repayment period can range from one month to a few-years. If you are in need of money for immediate expenses and expect to be able to pay it back in the short-term, then this type of loan might be a good option.

Paytm launches 2 new services under wealth management offering

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Paytm has announced the launch of two new services - Gold Gifting and Gold Savings Plan as part of its wealth-management offering, Paytm-Gold. The company said the customers can now send 24K 999.9 purity gold to each other instantly-offering them a convenient gifting solution. It said that more than 60 % of Paytm Gold purchases are from tier-two and three cities.


Gold Loan Videos

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