Know About the Gold Loan Advantages

3 min


A gold loan is the easiest way to fulfil your financial needs. It is the best way to gain the most of your idle gold. In most cases, minimal documentation, quick loan disbursement, and complete safety for your gold are the attractive qualities that a gold loan possesses. These are some of the quickest and hassle-free ways of getting instant cash, helping fund you with emergency medical needs, education, down payment for property, and business purposes to name a few.

The demand for gold has been on a constant rise since 1987, increasing to about 804% until 2016, according to the World Gold Council (WGC). Apart from being used for commercial or industrial purposes, gold also plays a major role in the investment and loan business. At times of financial crunch, your idle gold can serve its purpose. Unlike other secured loans such as home loans or car loans, there are no restrictions on the end-use of gold loans. Applying for a gold loan is much simpler than any other loan. All that you would require PAN card or Aadhaar card, the requisite KYC (Know Your Customer) documents, and the gold itself.

Before you step into gold loans, here are a few of the benefits of applying for a gold loan, for you to make an informed decision.

Fast processing

Since these types of loans require pledging physical gold, lenders consider them to be secured loans. Lenders have a form of security for the money that they lend. This security is strengthened by the fact that the loan amount provided is generally lesser than the exact value of the gold pledged. Hence, all that the lender requires is your gold, address proof, and identity proof, and they are ready to give you money.

High LTV

The loan-to-value (LTV) ratio is an assessment of lending risk that banks, NBFCs, and other lenders examine before approving a mortgage, and ideally, loan assessments with high LTV ratios are considered higher-risk loans. As of April 1, 2021, the Reserve Bank of India (RBI) has increased the LTV from 75% to 90% depending on the institution. Currently, banks have the highest LTV value of 90% while NBFCs have only up to 75%.

Option to pay interest only

Lenders have various repayment structures. These terms of repayment are ideally flexible and the borrower can decide how they prefer to pay based on factors such as their repayment capacity, the loan amount, the interest rate, and the tenor of the loan. This flexibility allows the borrowers to pay the interest amount in the form of Equated Monthly Instalments (EMI) and pay the principal loan amount towards the end of the tenor of the loan.

Lower interest rate:

The interest of gold loans is easily 8% lower than personal loans, irrespective of the fact that they both serve almost the same purpose, which is funding personal, emergency financial needs. Generally, the gold loan interest rate ranges between 13% to 15%, depending on the gold loan policies of the individual lenders.

No processing fees and Low or no foreclosure charges:

Banks do not charge a processing fee for gold loans as this loan is given against gold instantly. Since these loans are given instantly in lieu of gold which is held as collateral with the lender, the documentation time and complication is lesser. In terms of foreclosure charges, certain financial institutions charge valuation charges, processing fees, and outstanding loan charges up to 1%.

No-income proof required and credit history:

Unlike other loans, gold loans do not require proof of income or good credit history. Most loans require proof of income to ensure that the borrower has the repayment capacity. They also check on the credit history of the borrower for the same. However, in the case of gold loans, since the gold is submitted as collateral for the lender’s money, the lender does not require additional documentation. These factors act as a source of confidence for the lender.

Safety of gold:

The benefit of taking a gold loan is that once pledged, the gold is handed over to the lender as collateral for their money. In this case, your idle gold is safer in the vault of a bank or an NBFC rather than a drawer in your wardrobe. Moreover, it gets you fast liquid cash for your emergency expenses.


Gold loans are easily available to everyone over the age of 18 and are provided not just by banks but also by Non-Banking Financial Companies (NBFCs), jewelers, and other lenders. Banks, NBFCs, and other lenders are actively opting for loans against gold in recent days. Hence, availing of gold loans no longer requires a long hunt for the right lender, as long as you have done your background check on your preferred lender.

Getting a gold loan is the simplest as gold in any form is accepted by financial institutions, be it gold bars, coins, or even jewellery. Once pledged, the institution runs a complete evaluation of your gold loan application before the loan is given against your gold. Considering all these benefits, gold loans are best suited for many and you must remember, the best time to avail of a gold loan is when the gold prices are on the high. You can apply for the Bajaj Finserv Gold Loan to get the best interest rates with the right evaluation.

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