Gold Loan — Complete Guide for Borrowers
A gold loan lets you unlock cash from your idle gold jewellery without selling it. It's one of the fastest, easiest loans in India. Here's everything you need to know before applying.
What is a Gold Loan?
A gold loan (also called a gold pledge loan or ornament loan) is a secured loan where you pledge your gold jewellery or coins as collateral with a bank or NBFC. The lender evaluates your gold, gives you a loan against it, and returns your gold when you repay the full amount.
How the Process Works
- 1You walk into a bank or NBFC branch with your gold jewellery (minimum 18K purity)
- 2The lender's appraiser tests and weighs your gold, calculates its current market value
- 3Lender offers you a loan of 65–75% of your gold's market value (this is the LTV ratio)
- 4You agree to the terms — interest rate, tenure, and repayment option
- 5Loan is disbursed in minutes — directly to your bank account or in cash for small amounts
- 6Once you repay the full loan amount + interest, your gold is returned safely
Gold Loan vs Personal Loan — Key Differences
| Feature | Gold Loan | Personal Loan |
|---|---|---|
| Interest Rate | 7–24% p.a. | 10–24% p.a. |
| Processing Time | 15–30 minutes | 1–7 days |
| CIBIL Score Required | Not mandatory | 700+ usually required |
| Income Proof | Not required | Required |
| Maximum Amount | 75% of gold value | Based on income |
| Collateral | Gold jewellery | None (unsecured) |
| Tenure | 3–36 months | 12–60 months |
| Prepayment Penalty | Usually nil | 2–5% |
* Rates are indicative and vary by lender. Always check current rates before applying.
Understanding LTV (Loan to Value) Ratio
The Loan-to-Value (LTV) ratio determines how much loan you get against your gold. RBI currently permits a maximum LTV of 75% for gold loans from banks and most NBFCs.
LTV Calculation Example
Note: Lenders apply a 'net weight' (deducting stones, chains) and may use a lower rate than market for valuation. Actual loan amount will differ.
Use our Gold Rate to Estimate Your Loan Amount
Check today's 22K gold rate on GoldRate.app, multiply by your gold weight, then apply 65–75% to estimate your potential loan amount.
Check Today's Gold Rate →Top Gold Loan Lenders in India
Muthoot Finance
NBFCLargest gold loan NBFC in India, 5,000+ branches
12–24% p.a.
LTV: Up to 75%
Manappuram Finance
NBFCOnline gold loan available, quick disbursal
12–26% p.a.
LTV: Up to 75%
SBI (State Bank of India)
PSU BankLowest rates, but slower process vs NBFCs
8.75–9.75% p.a.
LTV: Up to 75%
HDFC Bank
Private BankDoorstep gold loan service available
10–17.5% p.a.
LTV: Up to 75%
ICICI Bank
Private BankInstant disbursal for existing customers
10–16% p.a.
LTV: Up to 75%
Axis Bank
Private BankCompetitive rates for higher loan amounts
15–17% p.a.
LTV: Up to 75%
Bajaj Finance
NBFCFlexible repayment options
9.5–26% p.a.
LTV: Up to 75%
Interest rates are indicative and subject to change. Compare current offers at GoldRate.app Gold Loans page.
Gold Loan Repayment Options
Bullet Repayment (Most Popular)
Most FlexiblePay the entire principal + interest at the end of the loan tenure. No monthly EMI. Best for those who expect a lump sum (salary, sale proceeds, harvest income) at the end.
Regular EMI (Equated Monthly Installment)
PredictablePay equal monthly installments covering both principal and interest. Similar to a regular loan. Best for salaried individuals with steady monthly income.
Interest-Only EMI
Lower MonthlyPay only the interest every month and repay the principal at the end. Lower monthly outgo than full EMI but total interest paid may be higher.
Overdraft / Flexi Loan
Business FriendlyGet a gold-backed credit limit. Draw and repay as needed, paying interest only on the amount used. Ideal for businesses with fluctuating cash flow needs.
Tips to Get the Best Gold Loan Deal
💡 Compare multiple lenders
Interest rates can vary from 8% to 26% for the same gold. Always get quotes from at least 3 lenders — one PSU bank, one NBFC, and one private bank.
💡 Ensure your gold is hallmarked
BIS hallmarked gold gets better valuation. Non-hallmarked or lower-purity gold will be assessed at a discount, reducing your loan amount.
💡 Check the per-gram rate offered
Ask the lender what per-gram rate they're using for valuation. Compare with the current market rate on GoldRate.app. A reputable lender uses 90–95% of market rate.
💡 Understand all hidden charges
Ask about: processing fee, valuation charges, safe custody charges, late payment fees, and foreclosure charges. Total cost of loan can be 2–4% higher than the stated interest rate.
💡 Choose the right tenure
Longer tenures mean lower EMIs but more total interest. If you expect to repay quickly, opt for bullet repayment to save on interest.
💡 Ask about top-up facility
If gold prices rise after you take the loan, you may be eligible for a top-up without additional collateral. Ask your lender.
What Happens if You Default on a Gold Loan?
If you fail to repay a gold loan, the lender has the right to auction your pledged gold to recover the outstanding amount. This is different from personal loans where defaulting primarily affects your CIBIL score.
Gold Loan Default — What Happens
- 1. Lender sends notice demanding repayment
- 2. Grace period of 15–30 days is typically given
- 3. If unpaid, lender issues auction notice (public notice required)
- 4. Gold is auctioned at current market price
- 5. Outstanding loan + interest + auction charges deducted
- 6. Remaining amount (if any) is returned to borrower
- 7. Default is reported to credit bureaus — CIBIL score impacted
To avoid default, always borrow only what you can comfortably repay. Set up reminders for due dates, and contact your lender immediately if you face cash flow issues — most lenders offer restructuring options before resorting to auction.
FAQs — Gold Loans in India
What is the minimum gold purity required for a gold loan?
Most banks and NBFCs accept gold jewellery of 18K and above (75% purity). Some lenders may accept lower purity, but the valuation will be proportionally lower. 22K (916) gold gets the best valuation.
Does a gold loan affect my CIBIL score?
A gold loan appears on your credit report. Regular repayments improve your CIBIL score. Default or late payments will hurt it. Taking a gold loan itself does not negatively impact your score — only your repayment behavior does.
How is gold kept safe with the lender?
Lenders store pledged gold in their secure vaults or lockers. Banks maintain RBI-mandated standards for gold custody. You receive a pledge receipt that must be presented when redeeming your gold.
Can I take a gold loan for agricultural purposes?
Yes. Agricultural gold loans have a higher LTV limit of up to 90% (vs 75% for others) and may be available at subsidized rates from cooperative banks and regional rural banks.
Is GST applicable on gold loans?
No GST applies on the loan amount itself. However, GST (18%) is charged on processing fees, valuation charges, and other service fees associated with the gold loan.
Compare Gold Loan Offers in India
Check interest rates from top banks and NBFCs to get the best deal on your gold loan.
Compare Gold Loan Rates →