Gold Loan

What is Gold Loan?

Gold loan is a secured loan that can be availed by pledging gold articles such as jewellery or gold coins as collateral with the bank. Also known as loan against gold, gold loan can be used to meet a variety of needs including higher education, wedding expenses, travel expenses, medical emergency or any other urgent need of cash. Since gold loan is a secured loan, it can be availed quickly with minimal paperwork. You can find a number of gold loan schemes from top banks in India and choose the one that charges a low interest rate that starts from as low as 7% onwards per annum.

Features and Benefits of Gold Loan

Some of the key highlights of gold loan in India are:

• Low Interest Rate- Gold loan interest rate is lower as compared to unsecured loan options such as personal loans.
• Low Processing Fee- Apart from a low rate of interest, gold loan also charges a lower processing fee, foreclosure charges, etc. making it quite an economical option for many.
• Minimal Documentation- Gold loan requires much less paperwork than other secured loans. You can also get a gold loan without income documents. However, the requirements may vary from lender to lender.
• No Credit Score Check- Lenders usually do not check your credit score when you take a gold loan.
• Quick Processing- Since gold loan requires minimal documentation and is secured against the gold item, lender are quick to disburse the loan without any background or income check. Some lenders also provider same day loan disbursal.
• Varied Usage- Gold loan can be used to meet an urgent need for cash whether it is an educational, medical, business, travel or any other need.

Gold Loan Interest Rates offered by Various Lenders

Lenders	Interest Rate
Bank of India	8.80% p.a. onwards
Canara Bank	9.25% p.a.
Punjab National Bank	9.25% p.a. onwards
IIFL Finance	11.88%-27% p.a.
Rupeek	8.88% p.a. onwards
ICICI Bank	10% p.a.
Axis Bank	17%-19% p.a.
India Gold	0.77% per month
State Bank of India	8.75% p.a. onwards
Bajaj Finserv	9.50% – 28% p.a.

Rates as of 22nd February 2024

Gold Loan Eligibility and Documentation

Gold loan eligibility criteria vary from one lender to another. Though you will have to meet only a few basic requirements such as age limit, you must own a gold article that the bank accepts as collateral.

What type of gold is accepted as collateral?

Most of the banks and NBFCs accept only Gold ornaments/jewellery and gold coins (that are sold by banks) as collaterals. Other gold articles such as gold bars, idols, biscuits, etc. cannot be pledged as collateral with the bank or NBFC.

Your gold loan eligibility will also be calculated based on the purity of gold, weight of gold and the current market value.

Documents Required to Apply For Gold Loan

When you apply for gold loan, you will have to submit the following documents:

• Proof of Identity
• Proof of Address
• Recent Photograph

Most of the gold loan lenders do not ask for income proof at the time of gold loan application. However, it depends on the bank’s internal policies.

How to Apply for Gold Loan?

You can apply for gold loan through Paisabazaar.com. Follow the steps given below:

Step 1: Visit our gold loan marketplace.

Step 2: Enter the required details such as loan amount, full name, mobile number, etc. and proceed.

Step 3: You can now see the weight of gold that you need to pledge as collateral in order to get the loan amount that you have entered. You can modify the amount at this stage or proceed.

Step 4: Now you will see the best offers available to you along with their interest rates. Apply with the lender that best matches your needs.

Step 5: Enter more details as asked. Also, select the appointment date.

Step 6: Proceed with the application and submit the form.

You have now applied for gold loan. A representative from the bank/NBFC will call you and guide you through the process. You would need to visit the bank branch during the said period. The lender will value your gold item and grant the loan. Note that some lenders such as Rupeek also offer doorstep service so that you do not have to visit the branch.

Things to Know before Applying for Gold Loan

Before you apply for gold loan, here are few important things to understand:

Loan to Value Ratio: The LTV Ratio is the loan amount that you can get against your gold article that you wish to put as collateral. Previously, the LTV was up to 75% but during COVID-19 pandemic, RBI increased this limit to 90%. This means if your gold ornament is worth Rs. 2 Lakhs, you can get a loan of up to Rs. 1,80,000 against it.

Safety of Your Gold Item: Once you deposit your gold item as collateral with the bank/NBFC, they keep it in a safe vault. However, you must ask your lender about the same to ensure the safety of your precious jewellery or coin.

Defaulting on Gold Loan: You must repay your gold loan on time. If you default on your loan, the bank/NBFC has the right to seize your gold item or sell the same to recover the loan amount.

It is important to do your research before applying for a gold loan. Check the list of lenders and the interest rates charged by them. Also, check other fees and charges such as foreclosure charge and processing fee and then make a decision.

Gold Loan Repayment

Unlike other loans wherein you have to pay a certain portion of the interest and principal every month in the form of EMI, Gold Loan Repayment comes in many forms.

Bullet Repayment: In the Bullet Repayment method, you have to repay the entire amount of both the principal and interest amount at the end of the loan’s term. The interest is calculated each month, however its payment (along with principal repayment) becomes due only at the end of the term.

Pay Interest as EMI & Principal Later: You can choose this option to repay the interest amount as per the EMI schedule of the gold loan. However, the principal amount borrowed is to be paid, in full, at the time of maturity.

Regular EMI: As the name suggests, the regular EMIs would include portions of interest and principal, which you will have to pay every month.

Partial Payments: Under this gold loan repayment method, you can make payment of interest and principal amount as and when you desire without conforming to a set EMI schedule.

FAQs on Gold Loan

What type of gold jewellery or coin is accepted as collateral for a gold loan?

Currently, all forms of gold jewellery including rings, necklaces, bangles etc. are accepted as security. Some banks accept specific gold coins of up to a certain weight, but gold bars are not yet accepted as collateral. In case the gold ornaments are encrusted with valuable gems, the valuation costs would not include the value of gems and your loan amount will be decided based on the weight of gold.

What happens to the gold ornaments I use as collateral?

Your gold collateral needs to be deposited with the bank or NBFC, where it is stored in a secure vault with CCTV security as well as round the clock security presence. You will get the gold back once you have paid the loan principal plus interest in full.

Who decides the value of the gold I intend to use as collateral?

Most NBFCs and banks have in-house evaluators, who check the purity and weight of the gold to decide its value. Your loan amount is dependent on the estimate provided by the in-house evaluator and the gold prices on the date of evaluation.

Is there an option for prepayment in case of a gold loan?

Usually, banks allow borrowers to prepay their gold loan before the tenure ends and most of them do not charge any prepayment penalty. Others might charge a prepayment penalty, which varies from lender to lender.

I do not have a decent credit score. Can I still get a gold loan?

Yes, you do not need to have a good credit score to avail a gold loan as the loan is a secured one. So, for gold loan eligibility, you just need to have gold and those with low credit score or default repayments are also eligible to get a gold loan. However, gold loan is taken into account in your CIBIL report and hence you should pay regular EMIs to improve your CIBIL score.