A gold loan lets you pledge gold to get immediate funds from lenders. You receive money based on your gold’s value and purity. This loan type has become popular across India due to quick approvals and minimal paperwork. You can access funds within hours without extensive credit checks.
Understanding Gold Loans
You pledge gold jewellery, ornaments, or coins with a bank or financial institution. The lender assesses your gold based on purity, weight, and market rates. You receive up to 75% of the gold’s value as per Reserve Bank of India (RBI) rules. A gold loan focuses on collateral value rather than your credit history. This makes it accessible even if you have limited credit records.
Types of Gold Loans Available
Different gold loan options suit various repayment needs and financial situations.
Term Loans
You receive a lump sum amount against pledged gold in term loans. You repay through fixed monthly Equated Instalments (EMIs) over 6 to 36 months. This structure gives you predictable monthly payment obligations.
Overdraft Facilities
Overdraft facilities offer flexible credit access within a sanctioned limit. You draw funds only when needed. Interest applies only on the withdrawn amount, not the entire limit. This option suits you if you have irregular fund requirements.
Bullet Repayment Schemes
You repay the entire principal and interest as one lump sum at maturity. No monthly EMI obligations exist under this scheme. This suits you if you expect fund inflows at specific future dates.
EMI-Based Loans
You pay monthly installments covering both principal and interest components. This offers structured repayment aligned with regular income cycles. The predictable pattern helps you manage monthly budgets effectively.
Agricultural Gold Loans
Farmers receive specialised features including reduced interest rates and flexible repayment terms. These schemes align with agricultural seasonal cash flows. You can use funds for operational expenses and working capital needs.
Doorstep Gold Loan Services
A doorstep gold loan brings loan processing directly to your location. Representatives visit your home to assess gold and complete documentation. This service saves you travel time and offers convenience. You receive the same loan benefits without visiting a branch.
Eligibility Criteria and Documentation
You must be an Indian resident aged 18 years or above. Most lenders set maximum age limits around 75 years. Your gold must have a minimum purity of 18 karats. Lenders prefer 22 to 24-karat gold for better loan amounts. Bureau of Indian Standards (BIS) hallmarked gold receives preferential treatment.
You need to own physical gold as jewellery, ornaments, or coins. Proof of ownership and purity certification must accompany your application. No minimum weight requirement exists. Your loan amount scales with gold quantity and purity.
Documentation remains minimal compared to conventional loans. You need identity proof like a PAN card, Aadhaar card, passport, or driving licence. Address proof includes Aadhaar card, utility bills, or driving licence. Recent photographs complete the basic requirements. Income proof becomes mandatory only for amounts exceeding ₹5 Lakhs. Lenders prioritise collateral value over credit score verification.
Interest Rates and Loan-to-Value Ratios
Interest rates vary across lenders and market conditions. Bank rates range from 8.05% to 11.60% per annum as of 2025. Specialised financial institutions offer rates between 9.9% to 27% per annum. Rates depend on loan structure, amount, tenure, and your profile.
The Loan-to-Value (LTV) ratio reaches maximum 75% as per RBI guidelines. You can borrow up to ₹75,000 against gold worth ₹100,000. Processing fees typically range from 0.25% to 1% of loan amount plus GST. Some premium schemes offer reduced or zero processing fees.
Safety and Storage Features
Lenders store your pledged gold in high-security vaults after careful weighing and sealing. You observe the marking and sealing process before storage. Security measures include advanced combination locks and restricted access protocols. CCTV surveillance operates continuously throughout the storage facility. Regular security audits maintain vault integrity during your loan tenure.
Your gold receives 100% insurance coverage against theft, loss, or damage. Lenders bear full responsibility for stored gold security. This contrasts with bank lockers that typically exclude liability. The storage arrangement transfers all risk to the lending institution. You avoid separate locker rental charges and annual fees. Formal receipts document your gold inventory throughout the loan period.
Repayment Flexibility and Benefits
You can structure payments based on your cash flow patterns. Some schemes allow interest-only payments during the loan tenure. You repay principal at maturity under such arrangements. Early repayment becomes possible without penalties after three months typically. You reclaim pledged gold immediately upon completing payment obligations.
Loan renewal lets you extend your gold loan based on positive repayment history. Increased gold valuations may allow higher loan amounts upon renewal. This benefits you if you need extended financial support. Timely repayment builds positive credit history reported to credit bureaux. Your credit score improves, enhancing eligibility for future financial products.
Quick Fund Access and Processing
Lenders approve applications and disburse funds within hours of receiving documents. Some banks advertise same-day disbursement within 60 minutes. This speed addresses immediate financial crises effectively. The simplified process eliminates extensive income verification and credit evaluation requirements. You only need KYC documents and gold ornaments for assessment.
Usage Flexibility
You can use gold loan funds for any legitimate purpose. No restrictions apply to fund utilisation. Education expenses, medical treatments, and business needs qualify equally. Festival expenses, debt consolidation, and household emergencies remain valid uses. This unrestricted flexibility distinguishes gold loans from purpose-specific lending products. You maintain maximum financial autonomy over borrowed funds.
A gold loan provides immediate capital access whilst securing your valuable assets. Your gold remains protected in institutional storage throughout the loan duration. You retain ownership and reclaim assets upon completing repayment obligations.
Also Read: Gold and silver prices up by 2 pc over positive global cues
