Gold Loan

Loans & Credit

A gold loan is secured credit against pledged gold jewellery or coins. Banks and NBFCs (Muthoot Finance, Manappuram) offer gold loans at 8-24% interest rate, disbursed within minutes. LTV (Loan-to-Value) capped at 75% by RBI. Most flexible short-term credit option for gold holders.

In detail

Gold loan features:nLTV: maximum 75% of gold market value (RBI mandate)nRepayment: bullet (lump sum at end) or monthly interestnTenure: 3-12 months typically, renewablenProcessing: 30-60 minutes -- gold valued, loan disbursed same daynInterest: 8-16% per annum (banks cheaper than NBFCs)nDefaulter action: bank auctions pledged gold after noticennGold loan vs personal loan:nGold loan: secured, faster, cheaper (8-12%), no credit score requirementnPersonal loan: unsecured, income-dependent, slower, expensive (12-24%), no asset at risknnFor emergency cash needs with gold: gold loan is almost always better than personal loan.

Formula

Gold loan amount = Gold weight x Purity factor x Market rate x LTV (75%)nExample: 100g 22-karat gold (91.6% pure) at Rs 6,000/gram:nLoan = 100 x 0.916 x Rs 6,000 x 0.75 = Rs 4.12L

Real-life example

🇮🇳 India example

Meena needs Rs 2L urgently. She has 50g gold jewellery. Gold value = 50 x 0.916 x Rs 6,500 = Rs 2.98L. LTV 75%: Rs 2.23L loan available. She gets Rs 2L gold loan at 10% for 6 months. Total interest: Rs 10,000. No personal loan required, no credit score check. Gold returned on repayment.

Frequently asked questions

What happens if I cannot repay my gold loan? ▼

Lender sends notice before auctioning. Most give 15-30 days to repay or renew the loan. If ignored, lender auctions the gold and recovers the principal + interest. Any surplus (sale price minus dues) is returned to you. For genuine emergencies, always communicate with lender -- gold loan NBFCs typically agree to renewal with just interest payment.