A Gold Loan is a secured loan where you pledge your gold jewellery or coins as collateral to get instant cash. The loan amount depends on the gold's purity and weight, and the LTV (Loan-to-Value) ratio set by RBI. The maximum LTV for gold loans is 75%, meaning you can get up to 75% of your gold's market value as a loan. It's one of the fastest loan approvals in India, typically disbursed within 30 minutes.
Worked Example:
Gold weight = 100g | Purity = 22K (0.916) | 24K base price = ₹15,600/gram | LTV = 75%
Gold value = 100 × 0.916 × 15,600 = ₹14,28,960
Eligible loan = 14,28,960 × 75% = ₹10,71,720
How is gold valued for a gold loan?▾
The lender assesses only the pure gold content. Making charges, stones, and other decorative elements are excluded. A professional assayer tests the purity using BIS hallmark or an acid test. The loan is calculated on the pure gold weight only.
What is the interest rate on gold loans?▾
Gold loan interest rates in India range from 7% to 29% per annum depending on the lender. Banks (SBI, HDFC) charge 8-11%. NBFCs (Muthoot, Manappuram) charge 12-24%. Always calculate the effective rate including processing fees.
What happens if I can't repay the gold loan?▾
If you default on repayment, the lender auctions your gold to recover the outstanding amount. Most lenders give notice before auction. To avoid this, you can request a loan restructuring or top-up if gold prices have increased.
Can I use hallmark gold for a gold loan?▾
Yes, BIS hallmarked gold (22K) is preferred and gets the best valuation. Hallmarked gold assures 91.6% purity. Non-hallmarked gold is accepted but may be valued conservatively after testing. Always store your gold loan receipts carefully.