How Gold Loans Work
You pledge gold jewellery or coins as collateral, and the lender advances a loan amount based on the gold's value and purity — commonly expressed as a loan-to-value (LTV) ratio. Because the loan is secured, processing is often quicker than unsecured personal loans.
Repayment Options
- Regular EMIs covering both principal and interest
- Bullet repayment — paying the full principal and interest at the end of the tenure
- Interest-only payments during the tenure, with principal due at maturity
What Affects the Loan Amount
- Purity and weight of the pledged gold
- The lender's applicable loan-to-value ratio
- Prevailing gold market rates at the time of valuation
Risks to Understand
If you are unable to repay as agreed, the lender may have the right to auction the pledged gold to recover the outstanding amount. It is important to borrow only what you can comfortably repay and to understand the lender's default and auction policy before pledging.
Compare loan-to-value ratios and interest rates across a few lenders before pledging your gold.