What is a Gold Loan?
A gold loan is a secured loan where you pledge your gold jewelry or ornaments as collateral to borrow money. It's one of the quickest and most accessible forms of credit in India, with minimal documentation and no credit score requirements. In 2024, the Indian gold loan market crossed ₹10 lakh crore, reflecting the massive demand.
How Gold Loans Work
- You visit a bank or NBFC with your gold jewelry
- Gold is appraised: Weight, purity, and current market value are assessed
- Loan amount is determined: Based on Loan-to-Value (LTV) ratio
- Documents submitted: ID proof, address proof, photo
- Loan disbursed: Often within 30-60 minutes
- You repay: Interest (monthly/quarterly) + principal on maturity
- Gold returned: Upon full repayment
LTV Ratio (Loan-to-Value)
RBI mandates a maximum LTV of 75% for gold loans. This means:
- If your gold is worth ₹1,00,000 → Maximum loan: ₹75,000
- If your gold is worth ₹5,00,000 → Maximum loan: ₹3,75,000
Note: Some NBFCs previously offered up to 90% LTV but RBI has capped it at 75% for regulated entities.
Gold Loan Interest Rates (2026)
Banks
| Bank | Interest Rate | LTV | Min Amount | Max Tenure |
|---|---|---|---|---|
| SBI | 8.65-9.65% | 75% | ₹20,000 | 36 months |
| Bank of Baroda | 8.50-9.50% | 75% | ₹10,000 | 12 months |
| PNB | 8.75-10.00% | 75% | ₹10,000 | 12 months |
| Canara Bank | 8.40-9.65% | 75% | ₹5,000 | 12 months |
| HDFC Bank | 10.50-16.50% | 75% | ₹25,000 | 24 months |
| ICICI Bank | 10.00-16.00% | 75% | ₹10,000 | 12 months |
| Axis Bank | 14.00-17.00% | 75% | ₹25,001 | 36 months |
NBFCs
| NBFC | Interest Rate | LTV | Min Amount | Max Tenure |
|---|---|---|---|---|
| Muthoot Finance | 12.00-26.00% | 75% | ₹1,500 | 12 months |
| Manappuram | 12.00-26.00% | 75% | ₹1,000 | 12 months |
| IIFL Finance | 11.88-24.00% | 75% | ₹3,000 | 11 months |
| Federal Bank | 9.85-11.50% | 75% | ₹10,000 | 12 months |
Key Insight: Public sector banks (SBI, BOB, Canara) offer the lowest rates (8-10%), while NBFCs like Muthoot and Manappuram charge more (12-26%) but offer faster processing and doorstep service.
Eligibility Criteria
Gold loans have the most relaxed eligibility among all loan types:
| Criteria | Requirement |
|---|---|
| Age | 18-70 years |
| Nationality | Indian resident |
| CIBIL Score | Not required |
| Income Proof | Not required in most cases |
| Gold | 18K-24K purity, minimum weight varies by lender |
| Documents | Aadhaar + PAN (or any 2 government IDs) |
What Gold is Accepted?
| Accepted | Not Accepted |
|---|---|
| Gold jewelry (22K, 18K) | Gold coins with purity below 18K |
| Gold coins (up to 50g, some banks) | Gold bars |
| Gold ornaments | Gold articles (utensils, watches) |
| BIS hallmarked gold | Gold with stones (weight deducted) |
Repayment Options
1. Regular EMI
- Pay monthly installments (principal + interest)
- Similar to personal loan repayment
- Best for: Steady income earners
2. Interest-Only (Bullet Repayment)
- Pay interest monthly/quarterly
- Pay full principal at maturity
- Best for: Business owners with seasonal income
3. Overdraft (OD/CC)
- Credit line against gold
- Pay interest only on utilized amount
- Best for: Businesses needing flexible credit
4. Bullet Repayment
- Pay entire principal + interest at end of tenure
- Highest total interest cost
- Best for: Short-term emergency needs
Step-by-Step: How to Get a Gold Loan
Step 1: Calculate Your Loan Eligibility
- Weigh your gold jewelry (net gold weight, excluding stones)
- Check current gold rate on GoldRate24
- Calculate: Gold Weight × Gold Rate × 75% = Maximum Loan Amount
Step 2: Compare Lenders
- Check interest rates across banks and NBFCs
- Consider processing fees (0-1% of loan amount)
- Check prepayment/foreclosure charges
Step 3: Visit the Branch
- Carry your gold jewelry in a secure manner
- Bring Aadhaar card + PAN card
- Carry passport-size photos (2)
Step 4: Gold Appraisal
- Lender tests gold purity (XRF machine or touchstone)
- Weight is measured after deducting stone weight
- Loan amount is calculated based on LTV
Step 5: Documentation
- Fill application form
- KYC verification
- Loan agreement signing
Step 6: Loan Disbursement
- Cash (up to ₹20,000 per RBI rules)
- Bank transfer
- Cheque
- Processing time: 30 minutes to 4 hours
Gold Loan Calculation Example
Scenario: You have a 50-gram 22K gold chain
| Parameter | Value |
|---|---|
| Gold weight | 50 grams |
| Purity | 22K (916) |
| 22K gold rate today | ₹7,000/gram |
| Gold value | ₹3,50,000 |
| Max LTV (75%) | ₹2,62,500 |
| Interest rate (SBI) | 9.00% p.a. |
| Tenure | 12 months |
| Monthly interest | ₹1,969 |
| Total interest | ₹23,625 |
Use our [Gold Loan Calculator](/calculators/gold-loan) for precise calculations.
Tips to Get the Best Gold Loan Rate
- Choose public sector banks: SBI, BOB, Canara offer rates 4-8% lower than NBFCs
- Negotiate: Banks have a rate range — ask for the lower end
- Check for seasonal offers: Banks run special schemes during festivals
- Maintain a relationship: Existing customers often get preferential rates
- Compare processing fees: Even if rates are similar, processing fees can differ
- Choose shorter tenure: Helps with discipline and reduces total interest
- Prepay when possible: Reduce interest burden; most banks allow free prepayment
- Take only what you need: Higher loan amount doesn't mean you should borrow more
What Happens if You Don't Repay?
Default Process
- Reminder notices: After 1-2 missed payments
- Legal notice: After 90 days of default
- Auction notice: Lender notifies you of intent to auction gold
- Gold auction: Lender sells gold to recover the loan amount
- Balance refund: If auction price exceeds loan + interest, the balance is returned to you
How to Avoid Default
- Set up auto-debit for EMIs
- Keep a 3-month buffer in your bank account
- If facing financial difficulty, contact the lender immediately for restructuring
Gold Loan vs Other Loan Options
| Feature | Gold Loan | Personal Loan | Home Loan |
|---|---|---|---|
| Interest Rate | 8-15% | 10-18% | 8-10% |
| Processing Time | 30 minutes | 2-7 days | 7-30 days |
| Documentation | Minimal | Extensive | Very extensive |
| CIBIL Required | No | Yes (750+) | Yes (700+) |
| Collateral | Gold | None | Property |
| Max Tenure | 3 years | 5 years | 30 years |
| Prepayment | Usually free | Charges may apply | Limited restrictions |
Conclusion
Gold loans are one of India's most convenient and affordable credit options. They're ideal for short-term needs, emergencies, or business cash flow. Public sector banks offer the best rates (8-10%), but NBFCs provide faster service. Always compare rates, read the fine print, and borrow only what you need.
Calculate your gold loan eligibility with our free [Gold Loan Calculator](/calculators/gold-loan) and check today's gold rates in [your city](/cities).
