Indians are known for their love for gold across the world. India is one of the biggest importers of gold in the world. Gold is considered to carry significant value and also as a source of potential capital appreciation for the future. However, not many know that gold can also be used to fund any emergency cash requirements like medical expenses, children’s education, business set-up, down payment for the vehicle purchases and even annual holidays with family.  

When you face a situation that requires urgent cash, you can make use of the gold that is lying idle in your bank locker. Today, many banks and non-banking financial companies (NBFCs) offer gold loans. These loans can come in handy and can be sourced in a hassle-free manner whenever there is a need for instant cash. You can get a loan against gold that you may possess in any form like jewellery, gold coins, gold bars, etc.

Additional Reading: Beginners Guide to Gold Loans

In this article, we will discuss some of the advantages offered by a loan against gold and why individuals should make the most of these.

What are the benefits offered by gold loans?

Some of the main benefits of loans against gold are as follows:

  1. Quick Processing – Since gold loans have physical gold as collateral, banks and other lending institutions easily provide such loans.  For banks, lending against gold is a safer option since they can easily sell the gold in case the borrower defaults. Hence, banks tend to disburse such loans within a matter of a few hours. This results in a lesser processing time and therefore, added convenience for borrowers.
  2. ‘Pay Interest Only’ Option – Gold loans often come with a unique feature that allows the borrower to only pay the interest component while repaying the loan. The principal component can be paid at the end of loan tenure or during closure formalities of the loan.
  3. Comparatively Lower Interest Rate – Since gold loans are secured loans, banks charge a lower interest rate as compared to unsecured loan such as personal loans. The interest rates for gold loans range from 13 to 14%. On the other hand, personal loan interest rates generally range around 15%. For borrowers who can provide additional collateral, the gold loan interest rates are further reduced by the bank.
  4. Zero Processing Fees – Many banks and NBFCs do not charge any processing fees since gold loans are provided instantly with gold as collateral held by the bank.
  5. Minimal Foreclosure Charges – Some banks and lenders either don’t charge or have minimal prepayment charges of 1% on gold loans.
  6. No-income Proof to be Furnished – In most gold loan applications, lenders don’t ask for income proof from borrowers since the loan is secured against the gold pledged by the borrower.
  7. No Impact of Poor Credit History – In most loans, the bank grants loan amounts depending on the repayment capability and credit history of the borrower. However, this is not the case with gold loans. Since gold is used as collateral, lenders are assured about repayment of the principal component and therefore don’t rely on the credit history of the borrower before granting the loan.
  8. Security of Physical Gold – The responsibility of safely maintaining the physical gold is that of the lender. It is normally kept safe in the bank’s vault and therefore, borrowers don’t have to worry about the same. Once they repay the loan, the gold is returned by the bank.

Additional Reading: How Can Gold Loans Help You Improve Your Credit Score?


Gold loans are easy to get, but borrowers have to make sure that they repay the loan on time, failing which the gold may have to be surrendered to the bank. Borrowers can take a gold loan from a gold loan company of their choice since the disbursement process is generally quick and easy.


  1. What are the benefits of taking a gold loan?

Some of the key benefits of taking a loan against gold are:

  • Reasonable interest rates and minimal processing fees
  • Minimal documentation
  • Low or no loan foreclosure charges
  • Flexible repayment tenures 
  • High LTV ratio
  • Different loan repayment options
  1. Is taking a gold loan safe?

Gold loans are considered a safe investment option. Physical gold may not yield great value or it may be very less, however, with gold loans borrowers can make use of the cash for various expense requirements.

  1. Which bank is best for a loan against gold?

SBI is known to offer a comparatively low gold loan interest rate of 7.50% for a loan tenure of a maximum of 36 months.

  1. Is a gold loan better than a personal loan?

A gold loan can be a better option as compared to a personal loan if a borrower repays the loan in a shorter duration. These are also known to have a lower interest rate. On the other hand, a personal loan is preferred by borrowers because of a longer tenure & higher loan amount. Depending on individual requirements and financial needs, borrowers can choose between the two.

  1. How can I get a loan against gold?

It is easy to get a gold loan from a bank either online if such services are available, or offline. Online applications can be made through the bank or lending institution’s official website.