Gold Loans – Process, Merits & Demerits

Gold loans are secured loans issued in exchange for the gold jewelry you pledge. The loan amount is determined by the purity of the gold and its current market price. Gold loans are immediate; the banker evaluates your gold and deposits the funds into your account. You do not need to provide any additional security or collateral because the gold serves as collateral. Gold loans are not based on your income, age, or credit score; only the gold is important.

Also Read: Beginners Guide To Gold Loans


  • There are no restrictions on how you can use the gold loan money.
  • There are no eligibility requirements for gold loans based on your age, income, or job type. The loan is entirely dependent on the gold you intend to pledge.
  • These are short-term loans with repayment terms of one to three years that can be extended.
  • You have the option of paying only the interest during the loan term and paying the principal in full when you want to close the loan.
  • The interest rate ranges between 9% and 12%. They are less expensive than personal loans because they are secured loans.
  • You can pay the interest component during the loan term and extend the loan for another period of time. 


  • As the loan amount is determined by the gold you pledge, it may be difficult if you do not have enough gold to cover the loan amount.
  • The price of gold fluctuates. If the market price of gold is low, the loan amount will be low as well.
  • Furthermore, the RBI has mandated that the gold loan amount not exceed 90% of the gold value.