When applying for loans, most people worry about their credit score. Banks and NBFCs usually check this score before approving personal loans, home loans, or car loans. But when it comes to gold loans, the situation is a bit different. Let’s understand how credit score impacts gold loan approval.
1. Gold loan is secured, not unsecured
Gold loans are backed by physical gold jewelry or coins. Since the lender keeps this gold as collateral, the loan is considered secured. This makes credit score less important compared to unsecured loans like personal loans.
2. Low dependency on credit score
For a personal loan, a low credit score (below 650) can reduce your chances of approval. However, in a gold loan, lenders mainly look at the purity and value of your gold, not your credit report. This makes gold loans easier to access for people with poor or no credit history.
3. Credit score can affect loan terms
Although credit score is not the primary factor, having a good score can still help you:
- Get better interest rates
- Access higher loan amounts (depending on LTV ratio)
- Enjoy faster approvals with fewer checks
4. Building credit with gold loans
If you repay your gold loan on time, it will reflect positively in your credit history. This can gradually improve your credit score and help you become eligible for bigger loans in the future.
5. When credit score matters more
If you apply for a large-value gold loan or from a reputed bank, the lender may still check your credit score as an additional precaution. In such cases, a poor score may not reject your loan but might reduce the loan amount or slightly increase the interest rate.