Gold Loan Interest Rates

Gold loan interest rate is a crucial factor that you have to consider while applying for a gold loan. Since you have to repay the loan over the specified tenure, shop around and pick a gold loan with the best interest rate since it will not create a financial burden for you. Loans taken against gold are secured loans, and the interest rates offered are comparatively lower than other types of loans.

Gold Loan Interest Rates in India 2024

Bank / NBFC	Interest Rate	Loan Amount
State Bank of India	8.75% p.a. to 9.60% p.a.	Rs.20,000 to Rs.50.00 lakhs
HDFC	8.50% p.a. to 17.45% p.a.	Starting at Rs.25,000
ICICI Bank	10.00% p.a. to 19.76% p.a.	Rs.50,000 to Rs.1 crore
Union Bank of India	8.70 % p.a. to 9.40% p.a.	Rs.15000 to Rs.25 lakhs
Canara Bank	9.25% p.a.	Rs.5000 to Rs.35 Lakh
Punjab National Bank	9.25% p.a.	Rs.25,000 to Rs.25 lakh
Indian Bank	8.65% to 9.00%	Rs.25,000 to Rs.35.00 lakhs
Axis Bank	14.5% p.a.	Rs.25,001 to Rs.40 lakhs
Indian Overseas Bank	8.80% p.a. to 9.35% p.a.	Rs.25,000 to Rs.25.00 lakhs
Indusind Bank	10.00% p.a. to 16.00% p.a.	Up to Rs.15 lakh
Kotak Mahindra Bank	8.00% p.a. to 24% p.a.	Rs.20,000 to Rs.15 lakh
Bank of Baroda	9.15% p.a.	Rs.3.00 lakhs up to Rs.50.00 lakhs
Bank of India	8.80% p.a. to 9.25% p.a.	Rs.1.00 lakh to 5.00 lakh
IDBI Bank	5.88% p.a. to 10% p.a.	Rs.10000 and Rs. 50 Lakh
Karur Vysya Bank	9.50% p.a.	Rs.5,000 to Rs. 75 lakhs
City Union Bank	9.50% p.a.	Rs.2.00 lakh to Rs.20.00 lakh
Tamilnad Mercantile Bank	9.45% to 13.85%	Rs. 3000 to Rs. 10.00 lakh
IDFC First Bank Limited	9.50% to 18%	Starting at Rs.10,000 and up to Rs.50.00 lakh
South Indian Bank	8.30% p.a. to 8.55% p.a.	Rs.5,000 to Rs.10.00 Crore
Bandhan Bank	10.99% p.a. to 18.00% p.a	Starts from Rs.10,000
Muthoot Finance	10.5% p.a. to 22% p.a.	Rs.1,500 onwards
Bajaj Finserv	9.50% p.a. to 28% p.a.	Rs.5000 onwards
IIFL Finance	11.88% p.a. to 27% p.a.	Rs.3,000 onwards

Note: The repayment tenure has been taken as 6 months for 22 karat gold. Gold loans usually have shorter tenures to fulfil immediate or urgent needs such as wedding expenses, medical expenditures, etc.

Factors Impacting Gold Loan Interest Rates

Fluctuation of Gold Prices in the Market - Gold loans are directly proportional to the current market value based on the metal’s purity scale. Lenders will be willing to offer lower interest rates on gold loans when the market price of the gold is high since the value of the collateral is higher. Higher market prices of the yellow metal reduces the risk of the lender in the case of default as they can easily sell the gold pledged and recover the amount. On the other hand, higher interest rates will be levied when the market price of gold is low.
Inflation - If the inflation rate is high, the value of gold depreciates and hence people tend to accumulate more gold. Thus, gold acts as a hedge against price rises due to inflation, especially when they continue for a longer period. This, in turn, increases the prices of gold. During such times, if you wish to take a gold loan, you may get lower interest rates from lenders.
Relationship with the Bank - Most lenders will give lower interest rates on gold loans if you have an existing relationship with the bank.
Gold Weight - The gold loan amount is related to the weight of the yellow metal. If the weight of the yellow metal is more, the gold loan amount will be more. Lenders consider the loan amount and the frequency of your repayment installments to determine the interest levied on your gold loan.
Gold Purity - Lenders give gold loans based on the purity of gold after the appraisal check, mainly above 18 carat. Higher purity gold is often associated with lower interest rates as it is easier to value and sell in the market.
Loan To Value Ratio - The loan to value ratio determines the maximum loan amount that can be obtained against the value of the gold being pledged. It plays a crucial role in determining interest rates on gold loans. Lenders determine the interest rate on gold loans and other charges based on the LTV ratio. The higher the value of the ratio the higher the interest rates and vice versa.

How To Compute Interest Rates on Gold Loans?

Gold is priced according to its current value in the market, and so market fluctuations will affect the gold prices.
Purity and weight of the gold also play an important factor in determining the price of gold.
Price variations of gold in the market affect the floating rate of interest on gold loans, which is directly proportional to the change in RBI’s repo rate. Banks then arrive at their final rate of interest on gold loans by using the marginal cost of funds based lending rate (MCLR) and adding a mark-up or a spread to it.

EMI Based Gold Loan

EMI based gold loan is something in which the payment of loan amount and interest will start one month after the disbursal of the loan. Let us now understand how the EMI for gold loan is computed.

Example: Say, A availed a gold loan of INR 2 lakhs. The annual interest rate is 7.5% (floating) and the loan tenure is 3 years. Then, the EMI he will be paying on a monthly basis is computed using the formula:

P x R x (1+R)^N / [(1+R)^N-1]

P is the principal loan amount = INR 2,000,00

N is the loan tenure in months = 36 months

R: Interest rate per month = [7.5/12/100] = 0.00625

EMI= INR 2,00,000 * 0.00625 * (1 + 0.00625)36 / ((1 + 0.00625)36 – 1)

Monthly EMI = 6499.19

The formula method is really cumbersome, so one can use a gold loan EMI calculator to evaluate the monthly EMI. You just have to enter the values and the result gets displayed. The interest payable and the total amount payable also gets displayed along with the EMI. For the same values given above, the monthly EMI is 6499.19, interest amount = Rs. 33970.98, and the total amount payable is Rs. 233970.98

Key Highlights of Gold Loans

Interest Rate	8.00% p.a.
Loan Amount	From Rs. 1500 to 1.5 crores
Loan Tenure	3 months to 4 years
Processing Fee	0.5% the loan amount + GST onwards

Features of A Gold Loan

The loan may be given within ten minutes
Minimal documentation that includes only the address proof and identity proof for most lenders.
Initially, you have to pay only the interest and then pay the principal when the loan matures.
You don’t need a good credit history to get a gold loan.

Why Should You Get A Gold Loan?

Interest rates are lower compared to other unsecured loans as collateral is pledged.
You don’t require any other collateral except gold.
There is no end use restriction of the funds like a car loan or a home loan.
Minimal documentation is required
You don’t need a good credit history to get a gold loan.

FAQs About Gold Loan Interest Rates:

1. What is loan amount per gram of gold?

Many lenders give you loans at attractive interest rates on pledging gold as collateral. The loan amount is determined by the weight of the pledged gold. It is calculated in loan amount per gram. It varies across banks.

2. How do I repay the gold loan I have taken?

You have the option to settle your gold loan through cash, electronic funds transfer, demand draft (DD), or cheque.

3. Is a gold loan EMI based?

Yes, gold loans can be EMI based. The EMI amount includes repayment on both the interest and principal amount. The loan is most suitable for salaried people, and it gets approved quickly.

4. Is there a choice to make a part-payment of the gold loan?

Most gold loan lenders will give you the option to part prepay your loan. But, you do have to check the charges for penalty for part prepayment. But part prepaying your loan will not help you get your gold ornaments back. You have to pay the entire outstanding amount for it. However, some lenders will be willing to release some of the ornaments if you need them immediately.