Gold has always been considered one of the most trusted and valuable assets in India. Traditionally, people bought gold as a form of investment and security during financial emergencies. In modern banking, this same gold can be used as collateral to avail a Gold Loan.
A gold loan is a secured loan provided by banks and NBFCs where customers pledge their gold jewelry or coins as security to borrow money. This type of loan is quick, flexible, and requires minimal documentation, making it one of the most popular loan options in India.
In this article, we will cover:
- What is a Gold Loan?
- How it works
- Eligibility & required documents
- Benefits & drawbacks
- Interest rates in 2025
- Step-by-step loan process
- Repayment methods
What is a Gold Loan?
A gold loan (also called a loan against gold) is a type of secured loan where your gold ornaments, coins, or jewelry are kept as collateral with the bank or financial institution. In return, you receive a loan amount, usually up to 75-80% of the gold’s market value (as per RBI guidelines).
The loan amount depends on:
- Purity of gold
- Weight of gold pledged
- Current market price of gold
How Does a Gold Loan Work?
- You pledge your gold jewelry/coins to a bank or NBFC.
- The bank evaluates the purity and weight of gold.
- Based on the gold value, the loan amount is sanctioned.
- You receive the loan instantly (within a few hours).
- You repay the loan via EMI, bullet payment, or part-payment.
- Once repayment is done, your gold is returned safely.
Eligibility Criteria for Gold Loan
Gold loans are easier to get compared to other loans because there are no strict eligibility requirements.
- Age: 18 to 70 years
- Employment: Salaried, self-employed, farmer, or business owner
- Gold Requirement: 18-24 carat gold jewelry/coins
- Credit Score: Not mandatory (even people with low CIBIL can get gold loan)
Documents Required
Minimal documents are required for a gold loan:
- Identity Proof: Aadhaar, Voter ID, Passport, Driving License
- Address Proof: Aadhaar, Utility Bill, Ration Card
- Photograph
- PAN Card (sometimes required for higher loan amounts)
Benefits of Gold Loan
Gold loans are very popular because of their multiple advantages:
- Quick approval & disbursal – Loan within hours
- Low interest rates compared to personal loans
- No income proof required
- Flexible repayment options
- No impact of credit score on eligibility
- Safe custody of gold by banks/NBFCs
- Can be used for any purpose (medical, education, business, etc.)
Drawbacks of Gold Loan
- Gold remains pledged until repayment
- Risk of losing gold in case of loan default
- Interest rate may be higher if taken from NBFCs compared to banks
- Only 75-80% of gold value can be availed as loan
Gold Loan Interest Rates in 2025
Gold loan interest rates in India generally range between 7% to 24% per annum depending on the bank/NBFC, loan amount, and tenure.
| Bank/NBFC | Interest Rate (2025) | Loan Tenure |
|---|---|---|
| SBI Gold Loan | 7.5% – 9.5% p.a. | Up to 36 months |
| HDFC Gold Loan | 8% – 18% p.a. | Up to 24 months |
| Muthoot Finance | 9% – 24% p.a. | Up to 36 months |
| Manappuram | 8% – 22% p.a. | Up to 24 months |
Step-by-Step Process to Get a Gold Loan
- Visit the nearest bank/NBFC branch or apply online.
- Submit your gold jewelry/coins for evaluation.
- Fill out the gold loan application form.
- Provide KYC documents (Aadhaar, ID, etc.).
- Bank verifies and approves the loan amount.
- Loan is disbursed to your bank account or via cash/cheque.
Repayment Methods
Gold loans offer flexible repayment options:
- Regular EMI – Pay principal + interest monthly
- Bullet Payment – Pay entire amount at the end of tenure
- Part Payment – Pay in parts whenever you can
- Overdraft Facility – Withdraw and repay as per need
Conclusion
Gold loans are one of the fastest and easiest financial solutions in India. They are ideal for emergencies, business needs, or personal expenses because they require minimal documentation, have flexible repayment methods, and are accessible to almost everyone.
If you have idle gold lying at home, pledging it for a loan can be a smarter choice than selling it. However, always compare interest rates, read terms carefully, and choose a trusted bank or NBFC to ensure your gold remains safe.