What is a Gold Loan? Some Advice and Tips

To avail a gold loan, a customer pledges gold (including jewels, ornaments and bank-issued coins) as security for taking out a loan. The lender uses the gold as protection against the customer’s future default on payment. A certain proportion of the gold value is the loan amount sanctioned.

Gold loans are taken for short-term, and the repayment tenure duration varies from one month to a few years. If you need funds for urgent costs and plan to be able to pay it back in the near term, it might be a reasonable idea for this form of a loan.

What benefits would a gold loan have?

Lower interest rate
  • Gold loan Interest rates are usually lower than rates of personal loans since this is a comparatively low-risk credit for lenders, and they keep the gold as collateral.
  • In comparison to the overall amount of the gold you have promised, the interest rate often ranges based on how much you intend to borrow. When the debt volume is not more than 50-60 % of the overall value of the gold article pledged, the interest rates are lower.
  • However, the interest rate would be correspondingly higher if the amount lent is high relative to the value of the gold. For instance, you can get a lower rate of interest on gold loans if you pledge ₹ 1,00,000 worth of jewellery and borrow a sum of ₹ 50,000 than if you commit the same value of gold but wish to borrow ₹ 70,000.
Fast process

Gold loans in India are some of the most accessible loans to be approved since banks have the gold as protection in the event of default, reducing the need for credit ratings or report checks. In a matter of minutes or only a few hours, the loan can be approved over the counter. After assurance of the quality and worth of the gold, many lenders can get their gold valued quickly and approve the loan immediately.

No need for income proof

In many situations, because your gold is kept as collateral by the investor, you are not even required to provide a salary certificate or salary slip. So, you will still qualify for this form of a loan, even though you are already unemployed or do not have a decent credit score. Although, for loans above a certain sum, some lenders may likely demand a salary certificate.

Few points to remember before choosing the Gold loan

Emotional Factor

In India, gold as a commodity has emotional significance since it is often in the form of family jewellery. Providing gold as security suggests that if you are unable to repay the loan, you run the risk of losing your family jewels. This will not only inflict undue mental and emotional strain on the borrower but also on the whole family. Hence, you must plan carefully how you are going to be able to pay back the entire loan before you apply. To be optimistic about your ability to retrieve your gold, it is good to have a proven track record of achieving loan repayments.

The Prestige of the Lender

There are many Non-Banking Financial Companies (NBFCs) that provide attractive offers and terms to borrowers pledging their gold on emi. Some of them could, though, be poorly managed and could probably shut down without warning leaving you at a loss. Studying the different lenders and picking one that has a strong reputation is very critical. Several nationalised and private banks provide gold loans in addition to these NBFCs.

Gold quality

Generally, lenders consider only gold of the value of 18 K and above. For this form of a loan, you will need to be over 21 years of age to apply.

Documents Required
  • For Identity Proof you will need PAN Card/ Aadhaar Card/ Voter’s ID Card/ Passport Copy
  • For proof of residence – Rent agreement/ Passport/ Driving License/ Utility Bills/ Aadhaar/ Voter’s ID Card.
Interest Rates

Interest rates for borrowing money through gold on EMI vary from lender to lender. The gold loan interest rate starts from 07.50% offered by the SBI.


If you agree that a gold loan is a viable choice for you, but you are not sure who to contact, Myloancare will place you in touch with trustworthy lenders who match your particular needs.


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