What is a Gold Loan?
A gold loan is a secured loan where the borrower pledges gold jewellery as collateral to receive a cash loan from a pawn broker, bank, or NBFC. The lender holds the gold safely until the loan is fully repaid. Once repaid, the gold is returned. The term "gold loan" is used interchangeably with "jewel loan" in South India.
Gold loans are the fastest, most accessible form of secured credit in India. Unlike personal loans that require income proof, credit history, and days of processing, a gold loan can be disbursed in 15–30 minutes against gold the borrower already owns. The gold's value — not the borrower's creditworthiness — determines the loan eligibility.
How a Gold Loan Works
- 1
Bring gold to the lender
The borrower brings gold jewellery to a pawn broker, bank branch, or NBFC outlet. The lender verifies the borrower's KYC (Aadhaar, PAN) and assesses the gold.
- 2
Gold is weighed and valued
The lender weighs the gold, tests purity, and calculates market value. Only the intrinsic gold value is considered — making charges and stones are excluded.
- 3
Loan is offered at LTV percentage
The maximum loan = Gold Value × LTV%. RBI mandates a maximum of 75% LTV for banks and NBFCs. A pawn broker may offer 65–75% depending on their licence category.
- 4
Loan disbursed, gold kept safely
The borrower signs the loan agreement / pawn ticket, receives cash or bank transfer, and the gold is stored securely in the lender's vault throughout the loan period.
- 5
Repay and collect gold
On repayment of principal + interest, the gold is returned. If not repaid, the lender auctions the gold after sending the required notices.
Who Offers Gold Loans in India?
| Lender Type | Examples | Interest Rate | Processing Time |
|---|---|---|---|
| Public sector banks | SBI, PNB, Canara Bank | 7.5–11% p.a. | 1–2 days |
| Private banks | HDFC, ICICI, Axis | 9–13% p.a. | Same day – 1 day |
| Gold loan NBFCs | Muthoot Finance, Manappuram | 12–18% p.a. | 30–60 minutes |
| State-registered pawn brokers | Local pawn shops | 12–24% p.a. | 15–30 minutes |
Gold Loan LTV — How Much Can You Borrow?
The maximum loan amount against gold is governed by the Loan-to-Value (LTV) ratio. RBI mandates a maximum 75% LTV for banks and NBFCs. This means:
Example: 20g of 22K gold at ₹5,693/gram
Gold Value = 20 × 5,693 × (22÷24) = ₹1,04,370
Max Loan at 75% LTV = ₹78,278
Gold Loan Eligibility in India
- Must be an Indian resident above 18 years of age
- Must own the gold being pledged (cannot pledge someone else's gold without their consent)
- Must have valid Aadhaar for identity verification
- PAN card required for loans above ₹20,000 (or Form 60 if no PAN)
- Gold must be genuine — tested by the lender before loan sanction
- No credit score or income proof required — the gold is the qualification
Why People Choose Gold Loans
- Fastest approval — disbursed in 15–30 minutes vs days for personal loans
- No credit check — no CIBIL score requirement
- Lower rate than personal loans — gold collateral makes it a secured loan
- Use for any purpose — no end-use restriction
- Gold remains safe — lender is legally responsible for the pledged gold
- Flexible repayment — interest-only or full repayment options available
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