Gold is one of the most precious metals for Indian society. The cultural and social impact of gold is unparalleled to any other metal. As a result, the importance of gold has led to its rise in the finance sector in India.

Getting a gold loan is not a recent phenomenon; it has been present in our society for ages. Gold is one of the oldest collateral people use to get fast cash. In a way, the quick cash a person can get at a time of emergency was one reason gold became so culturally significant. However, there are some reservations in people’s minds when it comes to getting a gold loan. Historically, money lenders have been known to keep interest rates almost impossible to pay off, which led people to go into debt.

Lately, new government policies and the rise of different FinTechs have made the process of getting a gold loan streamlined and customer-friendly. However, there are always some points that everyone should keep in mind when thinking about a gold loan to minimize their risk and maximize their profits.

Shop around

The most obvious advice that one can give you is to look for diverse deals. Gold loan per gram might vary hugely with different lenders. Also, each lender will have varying terms and conditions, processing fees, foreclosure charges, repayment tenure, and hidden costs.

Hence, it is best to keep in mind these details while choosing a lender which fits your needs the best. The applicant must also check the credibility of the lender providing the gold loan. Usually, there are two primary lenders in the Indian market: banks or NBFCs/FinTechs and local jewellery/pawn shops.

Loan amount

Lenders don’t offer credit worth 100% the value of gold being pawned. The loan amount ranges from 60-75% of the gold value. In addition, it also depends upon:

  1. Purity of gold
  2. Gold rates
  3. The policy of the institution or the shop

Further, there are two ways in which gold value is calculated:

  1. Average of gold rates during the last two weeks
  2. The present gold rate

Repayment of the gold loan

A critical mistake that people make is choosing a too short or too long repayment tenure. Either you cannot pay off the high EMI, which comes with a short repayment tenure resulting in losing the collateral gold. Or you pay a considerable amount in gold loan rates.

Both of these are financial catastrophes. As a result, choosing a repayment tenure wisely when opting for the gold loan is advisable.

Credit history

Banks and NBFCs do a background check on applicants’ credit history when deciding on the terms and conditions of the loan. A bad credit history, reflected by the credit score, means higher interest rates. But, there are several methods by which one can improve their credit score.

It is crucial because a higher credit score usually means lower gold loan rates. As a result, the lower rates make gold loans even more financially rewarding.


You can take the gold loan by keeping your jewellery, gold coins as well as bars. As the loan amount depends upon the purity of gold, coins or bars are usually better to keep as collateral in the gold loan.

On the other hand, when keeping jewellery as collateral, only gold weight is considered. Precious stones and gems are ignored. Thus, even when thinking about investing in gold, buying coins and bars of high purity is better than buying ornaments.

If the person keeps the above points in mind when thinking about taking a gold loan, they are most likely to avoid bad financial decisions. The gold loan process is also entirely between the applicant and the institution. Thus there is no worry about the social stigma of keeping your jewellery as collateral.