What Is a Gold Loan?
How lenders value your gold, what LTV means, how interest is charged, and the risks of an auction.
A gold loan is a secured loan against gold jewellery or specified coins. The lender holds the gold; you get funds quickly, usually the same day, without a credit-score-driven approval process.
How the amount is decided
Two inputs: the value of the gold, and the loan-to-value (LTV) ratio.
Lenders value only the gold content — stones and non-gold weight are excluded. Valuation is typically based on a recent average of gold prices rather than the day's high, which is why a lender's valuation can look lower than the day's headline rate.
The RBI caps the LTV on gold loans. If your gold is valued at ₹5,00,000 and the applicable LTV is 75%, the maximum loan is ₹3,75,000.
Interest and repayment structures
- Regular EMI — principal and interest over the tenure.
- Interest-only servicing, with the principal repaid as a bullet at the end.
- Bullet repayment — everything at maturity, with interest accrued.
Rates vary widely between banks, NBFCs and local lenders. Compare the annualised rate, and add processing and valuation fees to the comparison.
What to check before signing
- The purity and weight the lender recorded — get it on the sanction letter.
- Storage and insurance arrangements for your jewellery.
- Prepayment or foreclosure charges.
- Auction terms: notice period and process if you default.
The real risk
If gold prices fall sharply, some lenders make a margin call and ask you to repay part of the loan or pledge more gold. If you default, the lender can auction the jewellery after due notice. This is family jewellery, not an abstract collateral position — treat the tenure conservatively.
Indicative information only. Terms differ by lender; confirm current rules and rates directly.
Disclaimer: Rates are indicative and may vary based on market conditions, local premiums, taxes, jewellery making charges and other applicable charges.