What is a Gold Loan? 

Gold, the gleaming noble metal, has long been associated with India and Indians. Someone, somewhere, at some point, may have purchased, inherited, or been given it as a gift. 

A Gold Loan is a form of secured loan that is availed by placing your gold jewelry, gold coins, gold bars, or other gold articles as collateral. Gold loans are processed immediately and you can get up to 90% of the gold’s market value as a loan. It can be used to borrow money in an emergency or to fund your children's further education, marriage, business start-up, or emergency medical expenditures.

Gold Loan In India – A Snapshot


Loan Amount

Up to 90% of the market value of the gold pledged

Interest Rate

Around 9% - 11% p.a 

Repayment Tenure

12 months, which can be extended

Processing Fees

Starts at Rs.500


What Are The Advantages Of Getting A Gold Loan?

Loans secured by gold have become a more accessible and widely accepted kind of retail financing. As there is a guarantee of collateral received against it, both private and public sector banks have begun to view it as the safest source of lending. They are less difficult to obtain than unsecured loans such as personal loans or credit cards. In comparison to personal loans, the interest rate is also very low.

The current COVID pandemic has wreaked havoc on small-scale industry, with businesses suffering significant losses as a result of severe illness among their staff and frequent lockdown. These businesses have relied on gold loans to fund their short-term working capital and get back into operation during these difficult times.

Simple Processing: Since gold is a physical and mobile asset, banks and lending institutions easily accept it as collateral and offer loans against it. For these lending institutions, gold is a safe asset since they can easily sell it in the market in a situation where the borrower cannot repay the loan.

Interest Only Option: Lenders offer an attractive option to pay only the interest portion of the loan amount. The principal can be paid towards the end of the loan tenure or upon closure.

No Need To Check Credit History: Gold loans do not require you to have a good credit history or credit score. Since gold itself is offered as collateral by the borrower as an assurance towards payment of the principal amount, the banks and lending institutions do not check the credit history for granting such a loan. Hence, comparatively, it is an easier option than other loans.

Low Foreclosure Charges: Lenders offer borrowers the option of foreclosing the loan with as little as 1% interest on prepayment or no foreclosure charges at all. This is a high-value benefit offered to the borrowers.

Very Low Or Nil Processing Fees: Many banks and non-banking financial companies (NBFCs) do not charge any processing fees since the gold itself is offered as collateral. These loans are processed easily compared to other personal loans.

Low Interest Rates: Since gold itself is offered as collateral, these loans are considered secured loans, and the banks offer a lower rate of interest when compared to unsecured personal loans. The interest rates offered on gold loans range between 13 and 14%, which can be further lowered by offering more collateral. Personal loans, on the other hand, have an interest rate of around 15% for borrowers. Our insight on ‘Gold Loan VS Personal Loan’ can throw more light on this for you. 

No Tricky Income Proof Requirements: Gold loans do not require any income proof to be submitted. Since gold is provided as collateral, these loans are termed "secured loans" and hence the lenders do not ask for any source of income or type of income proof from the borrower.

Safety Of Your Gold Deposit: The security of the gold that is deposited by the borrower depends on the lender. Lenders usually keep gold in bank lockers or safe vaults, so the borrowers do not have to worry about the safety of their gold. This gold, which is safely deposited by the lender, is returned to the borrower after the loan is repaid.

Also Read: 8 Smart Benefits Of Taking A Gold Loan

How Can I Ensure That My Gold Loan Is Processed Easily? 

It is easy to apply for a gold loan. Many banks and NBFCs offer both online and offline services for applications. The borrower can visit the website and fill up the loan application after checking their own requirements and the procedures and terms and conditions defined by the banks/NBFCs. Or, they can visit the local branch office and fill out a physical form there. 

Here are a few things to keep in mind while you are applying for a gold loan: 

1. Know the real worth of your gold. Check the purity and weight of your gold before you approach a lender to ensure that you are not being cheated. 

2. Find out the day’s gold rate in the market to ensure that you are offered the right LTV (Loan To Value) ratio while calculating your loan amount. 

3. Make sure that you are going to a credible lender to ensure safety of your gold deposits. 

If you are wondering ‘Which Bank Is Best For Gold Loan’, compare the offers in the market before deciding. 


When compared to other types of secured and unsecured loans, gold loans are simple to obtain and provide numerous benefits to the borrower. This loan, like any other, comes with its own set of risks. If the borrower fails to return the loan on time, the deposited gold may be lost to the bank or NBFC. Even if these loans are easy to obtain, the borrower must exercise caution when selecting the company from whom they intend to borrow and thoroughly review all repayment terms and conditions prior to borrowing.

FAQs How To Get A Gold Loan Quickly?

1: Is a gold loan safe?

Yes, since these loans are considered secured loans, they are safe and the lender takes on the responsibility of safekeeping them.

2: Where to take the loan from?

Many nationalised banks, like SBI, ICICI, HDFC, etc., offer loans at competitive interest rates. There are private firms like Bajaj Finance, Muthoot Finance, Manappuram Gold, etc. that offer gold loans too. It is up to the borrower to compare which one fits best in their interest and make a choice.

3: Which is preferable, a gold loan or a personal loan?

A gold loan offers a lower rate of interest and also requires less documentation since the gold itself is kept with the lender. Because of the lesser rate of interest and zero processing fee, gold loans are comparatively better than personal loans.

4: What is the repayment tenure on gold loans?

Different lenders offer different repayment periods, which may range from 12 months to 3 years, depending on the loan amount and the repayment ability of the borrower. 

5: Is insurance provided on a gold loan?

Yes, many major lenders offer insurance coverage with the loan. In case the borrower meets with an accident or dies, then the bank or the institute will cover the loan amount and hand over the gold to the surviving family members. In such cases, the family is not held obligated to clear the debt.