Gold Loan: Features and Eligibility

In India, pledging gold to obtain a loan has become common. People pledge their gold jewelry to NBFCs or banks in order to receive funds quickly. Nowadays, getting a loan against gold is simple and easy. By following a few basic procedures, you can apply for it online. However, like with any loan, full awareness is required prior to entering into a financial agreement.

Gold loans are secured loans in which your gold items are pledged as collateral in order to obtain funds for your financial requirements and emergencies. When compared to personal and credit card loans, it is a less expensive loan. Here’s everything you need to know about gold loans, including how to receive the best rates and the most amount.

How does the gold loan work?

Gold loans are given in lieu of gold jewelry, coins, bars, and other valuables being deposited with the lender. The loan amount might be up to 80% of the value of the gold products pledged. However, based on the bank’s internal policies, the loan amount varies from lender to lender. Any Indian citizen who owns gold articles can apply for a gold loan.

After you deliver the gold item to the lender, an appraiser will inspect it and establish its quality and market value. You can start the paperwork once you’ve agreed to the loan amount and any fees. Following acceptance, the loan amount will be transferred to your bank account, while the gold will be retained by the lender.

The repayment period begins as soon as you receive the loan amount. The full loan amount, plus the interest set by the lender, must be repaid. A gold loan usually has a maximum repayment duration of two years. Some lenders, on the other hand, may offer you a longer repayment period.


Loan amount

A gold loan of at least Rs. 10,000 can be obtained. This may differ in urban regions, where the minimum amount may begin at Rs. 25,000. A gold loan has no maximum restriction with most lenders; you can use as many gold objects as you want to receive the loan. 


A gold loan’s minimum term can range from 3 to 6 months. A gold loan has a maximum tenure of four years. Most lenders, however, only offer maximum repayment duration of two years. 

Interest rate

The gold loan interest rate starts at around 7% and can reach as high as 26%. When you pledge your gold with NBFCs and private lenders, however, the interest rates are still higher.


The gold serves as security. They will be kept by the lender until the loan is fully paid off. If the borrower defaults on multiple occasions, the lender will auction the gold to recoup the losses.


The borrower has the option of pre-closing the loan before the term expires. Preclosure is usually free of charge with most NBFCs. Banks, on the other hand, charge a prepayment penalty equal to a percentage of the loan amount. It could be anywhere from 1% to 3% of the total. Because gold loans have a shorter term, most lenders do not impose a minimum lock-in time. If there is one, it could last anywhere from one to six months.

Processing fees

In order to entice consumers, several NBFCs waive the processing fees. Most banks, on the other hand, charge a processing fee that is a percentage of the loan amount. It might be anywhere from 0.50 percent and 3 percent, plus GST on top of the processing fee.

Late payment

Late payments on a gold loan can result in higher fees. The lender may charge you a fee if you make late payments. The amount of the fee differs from one lender to the next. Over and above the applicable rate of interest, it might be up to 2% every year.

Who is eligible for a gold loan?

To be qualified for a gold loan, you must meet the following requirements:

Nature of employment: A salaried, self-employed, businessman, farmer, trader, etc.

Age: You must be between the ages of 21 and 60 to qualify for a gold loan.

The bottom line

Simply take for a gold loan if you have any unused gold ornaments in your locker. There’s no need to be concerned about the safety of your pledged asset if you’re considering a gold loan. When it comes to handling your assets, reputable gold loan companies provide complete protection. As a result, if you’re in a tight spot, promise your gold jewelry to get cash as soon as possible. Borrowers can use the funds to pay for any type of expense because there are no end-use restrictions.

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