Gold loans, explained properly
A gold loan isn't an investment — it's a way to borrow against gold you already own, usually faster and cheaper than a personal loan. Worth understanding separately from the investment options on this site.
How it actually works
1. You pledge physical gold
Jewellery or coins, usually 18K–24K purity, handed over to the bank/NBFC for the loan term.
2. It's valued and capped by RBI rules
You can borrow up to 75% of the gold's market value (the Loan-to-Value cap set by RBI).
3. You repay via EMI or bullet
Standard EMI, or interest-only payments with the full principal due at the end — lender-dependent.
4. Gold is returned on full repayment
If you default, the lender can auction the pledged gold to recover the loan — understand this risk upfront.
What it really costs
| Interest rate | Roughly 9–15% p.a. depending on lender, loan tenure, and LTV chosen |
| Processing fee | ~0.5–1% of loan amount, often negotiable for larger loans |
| Valuation charges | Some lenders charge for gold appraisal, others waive it |
| Default risk | Auction of pledged gold if repayment stops — the real cost of getting this wrong |
Use the EMI calculator to estimate your monthly payment before you commit.
Who this suits
Good fit
Short-term liquidity need, with idle gold jewellery sitting unused. Usually faster to disburse and cheaper than an unsecured personal loan.
Less ideal fit
Long-term borrowing — the gold stays locked up and at risk the entire time, and interest adds up. Consider other financing first for extended needs.