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What Makes Gold Loan A Better Option?

gold loan

Many times in our lives, taking a loan becomes inevitable. It can be a health emergency or to fulfill your children’s education goals. There can be a number of reasons. Taking a personal loan is the first option that comes in our mind when we are faced with such scenarios. While personal loans are unsecured loans, everyone may not be eligible to receive a personal loan. The gold loan can come in handy in such scenarios. In India, most people have gold lying in their cupboards which is only taken out and worn during certain important occasions such as marriage.    

Gold loans can not only come in handy during emergency scenarios but it can also help improve your credit score.

However, many people hesitate using their gold as collateral to tide over difficult times. Read on to know more about gold loans.   

Here’s how loan against gold works

Gold loan is a form of secured loan that can be used as collateral to avail loan at attractive rates. Simply put, you keep your gold with a bank or a non-banking financial institution for a specific frame against which and you can get a loan with interest rates and charges. The financial institution values the gold articles within a range of 18-24 carats. It excludes the making charges of the jewellery and verifies the necessary document. The loan amount sanctioned to the customer is around 75-80% of the price of gold.   

After the loan tenure is complete and you have paid the principal, interest and other fees, the pledged gold article is returned back to you.  

Advantages of Gold Loan

Helps you tide over difficult scenarios 

While selling gold is considered inauspicious in Indian society, loan against gold can be an ideal solution to take care of difficult scenarios. Moreover, you don’t have to sell your goal ornaments and it is returned back to you after the dues are paid off. 

Credit score is not required

Banks consider the credit score before offering a loan to any customer. However, in the case of gold loans, the credit score does not carry equal weight as other loans. It is because it is a form of secured loans as the loans are offered on the back of collateral.

Faster processing time

Compared to other loans such as personal loans, gold loans are processed within a shorter span of time as the loan is given against collateral.

Attractive gold loan interest rate

Customers can get a loan against gold at attractive interest rates. Gold loans are cheaper than unsecured loans such as personal loans. On a rough estimate, the interest rate on gold loan starts at around 10.50% p.a. while the interest rate on personal loans starts anywhere from 15% p.a. The low-interest gold loan makes it easy for the customer to repay back the loan on a monthly or quarterly basis. 

Income proof is not required

While applying for various types of loans, customers have to submit their income proof in the form of salary slips or revenue generated from their business. Gold loan is a tad different in this case as interested loan applicants don’t have to submit any income proof as it offered on the back of collateral.

Improve your credit score

Timely repayment of loan dues can have a positive impact on your credit score. If you have a low credit score and want to build your credit score, applying for a loan against gold and repaying the dues on time can help to improve your credit score.

Different uses of gold loan

The end use of the gold loan is not specified. While other loans such as home loans and car loans can only be used for the specific purpose i.e. to buy a house or a car, there are no such restrictions on loan against gold. Loan holders can use the loan amount to fulfil financial goals such as child’s education, buy a house or car or tide over any financial emergency.  


Gold loan is a secured loan product and it allows customers to take a loan against their gold articles. The gold articles are kept as collateral and it is returned to the customer after the completion of the loan tenure and payment of principal, interest and other fees. As we Indians have gold lying in our cupboards and lockers, it comes in handy during emergency situations or fulfil other financial goals such as child’s education.


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