When you need money quickly and own gold jewellery or coins, a gold loan lets you borrow against it without selling. You pledge the gold, receive funds the same day in most cases, and get your gold back once you repay.
How a gold loan works
You take your gold to the lender, who checks its weight and purity and values it at the day's gold price. Based on that value, they sanction a loan up to the permitted loan-to-value ratio. The gold is stored securely, you repay per the agreed plan, and the gold is returned to you in full on closure.
How much you can borrow
The RBI caps gold-loan lending at a loan-to-value (LTV) of up to 75%. In other words, if your gold is valued at ₹1,00,000, you can borrow up to about ₹75,000. The final figure depends on:
- Purity — most lenders accept 18–22 carat and above; higher purity fetches a higher value.
- Net weight — only the gold content counts, not stones or other embellishments.
- Current gold price — valuation is done at the rate on the day you pledge.
Documents & eligibility
This is where gold loans shine — the requirements are minimal:
- KYC — PAN and/or Aadhaar
- A passport-size photograph
- The gold itself (jewellery or coins, per the lender's policy)
Good to know: Gold loans usually need no income proof and no minimum credit score, because the gold is the security. Any adult who owns the gold can typically apply.
Interest, tenure & repayment options
Gold loans are flexible on repayment — a big reason for their popularity. Common options include:
- Regular EMIs — pay principal and interest monthly, like a normal loan.
- Interest-only servicing — pay just the interest during the tenure and the principal at the end.
- Bullet repayment — pay everything (principal + interest) in one shot at the end of the term.
Tenures are usually short — a few months up to a few years. Interest rates depend on the lender, the plan you choose and the LTV.
Bank vs NBFC — which to choose
| Factor | Banks | Gold-loan NBFCs |
|---|---|---|
| Interest rate | Often lower | Usually a bit higher |
| Speed | Fast | Fastest — often within the hour |
| Flexibility | Standardised plans | More flexible repayment options |
| Hours & reach | Bank working hours | Longer hours, more branches |
If the lowest rate matters most, a bank is often best. If you value speed and flexible repayment, an NBFC may suit you better.
A few tips
- Compare the effective rate, not just the headline — factor in processing charges and the repayment structure.
- Check storage and insurance — make sure your gold is insured and securely stored.
- Borrow only what you need — a shorter, smaller loan keeps interest low and your gold safer.
- Read the auction clause — understand what happens if repayment is delayed.
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Frequently asked questions
How much loan can I get against my gold?
Lenders advance a loan based on the RBI-permitted loan-to-value, currently up to 75% of the value of the gold. The exact amount depends on the weight and purity of the gold and the gold price on the day of valuation.
What documents are needed?
Very little — usually just KYC (PAN or Aadhaar) and a passport-size photo. No income proof or credit score is typically required, since the gold itself is the security.
Is a gold loan cheaper from a bank or an NBFC?
Banks often offer lower interest rates, while gold-loan NBFCs tend to be faster, more flexible on repayment and open longer hours. It comes down to whether you prioritise the lowest rate or speed and convenience.
What happens if I can't repay?
If the loan isn't repaid, the lender can auction the pledged gold to recover the outstanding amount, after serving the required notices. Choosing an affordable repayment plan and staying in touch with the lender helps you avoid this.
This guide is general information, not financial advice. Loan-to-value limits, interest rates, purity norms and terms vary by lender and change over time. Please confirm current details with the lender or our team before deciding.