Gold loan

Gold loan – Meaning, Benefits, Eligibility & Process

Indian culture finds affinity with gold. Thanks to its intrinsic value, gold is also considered a viable option to avail of credits and mitigate financial crunches during emergencies. The current economic slowdown is a solid testimony to this fact. There has been an increase in the demand for gold as an investment option, resulting in an increment in its prices. At the same time, the World Gold Council reported that the gold loan market is expected to grow at an annual rate of 15.7% to reach Rs.4.61 lakh crore in FY22.


What is a gold loan?

It allows a borrower to pledge his/her gold jewellery as collateral to secure credits from the lender. The lender assesses the pledged gold item’s value and determines the applicable LTV to decide the loan amount to be credited to the borrower.

For example, the Reserve Bank of India has set the loan to value ratio (LTV) at 90%. So, if the value of gold is Rs.10,000, a lender can extend a loan amount not more than Rs.9,000 against it. This rate can, however, vary from one lender to another. It is wise to check the LTV on offer before applying for a gold loan.

What are the benefits of a gold loan?

Many individuals choose to opt for gold loans as a convenient financing option because of the following reasons:

  • Flexible in usage

The gold loan comes with no end-usage restrictions. It allows a borrower to use the money flexibly to meet any financial requirement.

  • Quick approval

Being a secured credit, the process of loan approval is quick, involving minimal documentation. Therefore, it helps a borrower meet any immediate financial crunch without hassle.

  • Flexible eligibility criteria

Compared to a personal loan, a gold loan is flexible in terms of meeting eligibility parameters. A high CIBIL score is also not mandatory to secure it. However, maintaining a healthy CIBIL score gives the borrower an edge in negotiating flexible repayment tenors or obtaining competitive gold loan interest.

  • Lower interest rate

Secured in nature. Hence, the applicable interest rate is nominal. It is wise to review the interest rate before availing credits against gold. Selected NBFCs like Bajaj Finserv charge a competitive interest rate on a gold loan, reducing the cost of repayment.

  • Easy to liquidate an idle asset

A gold loan is a convenient solution for every Indian household to raise funds, leveraging the equity of idle assets like gold.

Who is eligible for a gold loan?

Any salaried or self-employed individual, trader, farmer, and other professionals with an age limit between 21 to 70 years can apply.

The applicant needs to submit a few KYC documents, such as identity proof like Aadhar card, Voter ID, passport or PAN Card, etc. Other required documents include a residential proof.

Individuals may need to establish their income proof along with essential documents in later proceedings. Besides that, considering the purity of the gold asset before a loan application is important.

How to apply?

If an eligible borrower is willing to avail of a gold loan, he/she can reach out to the preferred financial institution.

Following is a step-wise guide for applying:

1: Visit the official website, followed by the online application page of your preferred financial institution.

2: Fill up the relevant information like name, residential PIN code, contact details, and required loan amount.

3: Submit the details online.

4: A representative will contact you for further proceedings.

Make sure to compare between different financial institutions to maximise benefits.

Additional Read: Know About the Benefits of Business Loan EMI Calculator

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