Answered: Your most burning questions about instant gold loans

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The gold loan market is expected to grow[1]  at a healthy CAGR of more than 13%. By 2022, the gold loan market should be worth more than Rs 4500 billion. These numbers make it evident that gold loans are highly favoured by Indians. However, one might still have several questions about gold loans. In this article, we have answered some of the most pressing questions which borrowers would have.



Q1) What is a gold loan?


A gold loan is a form of secured loan. It involves the lender keeping a borrower’s gold as collateral and lending funds, whose value is proportional to the value of gold. As compared to other loans, it is processed quickly. A borrower’s credit score is not required since the gold pledged by the borrower is treated as collateral. Usually, 75[2] % of gold’s value is disbursed as loan. The highlight of a gold loan is that it can be used for any purpose.



Q2) How do the lenders assign a value to my jewellery?


As a very famous saying goes, beauty lies in the eye of the beholder. While you might assign a very high value to a piece of jewellery, it being an heirloom or having exclusive craftsmanship, lenders are only interested in the volume of gold that the piece possesses.

Only the gold from your jewellery will be considered while assigning a loan. No other precious metals or gems.


Q3)What am I supposed to use as collateral for a gold loan?


Anything, be it an ornament or jewellery, with a certain threshold of purity of gold depending from Institution to Institution. This threshold is mostly anything above 18 carats.


Q4)How much money can I avail from a gold loan?


The maximum amount of money one can avail from a gold loan varies across lenders. But, most lenders earmark 75% value of the innate gold in the ornament or jewellery. This means if the value of gold in your pledged ornament is worth Rs 50,000 you would receive a gold loan of Rs 37,500. Keep in mind that the overall value of your ornament might be much more than Rs 50,000 but as mentioned earlier, only the value of gold in your ornament is considered.


Q5)What documents will I require for a gold loan?


You will mostly just require 2 documents one being your identity proof and address proof such as

  •       Aadhar card
  •       Valid driver’s license
  •       Pan card
  •       Voter ID card
  •       Voter password


Q6) Is there a processing fee with the gold loan?


While there absolutely is a processing fee with a gold loan, the fees are of a smaller amount as compared to other loans.



Q7)What guarantee of safety do I get for my ornaments or jewellery when I pledge them as collateral for a gold loan?


The lenders are equally concerned about your gold as you are. Thus, your gold is stored in safe their vaults, so the possibility of anything going wrong is incredibly low. Most credible lenders have up to date security systems and personnel guarding their vaults. Plus, the lender has your valuables insured, thus while pledging the gold, you have absolutely nothing to worry about.



Q8)What if I’m not able to pay back the amount I got for my instant gold loan?


Sometimes, the borrower might be unable to pay back the amount owed to the lender. In unfortunate cases like this, the lender will repeatedly give the loan bearer notices. Depending on the lender, the borrower’s relationship with the lender and the instances of delay, the lender would wait for the borrower to respond. If there is repeated reluctance in repaying the loan, the lender would be forced to possess the gold and claim ownership over it. The lender would then auction off the gold to the highest bidder.



Q9) How do I apply for a gold loan?


To apply for a gold loan, a borrower can visit the closest branch of a preferred lender. Over there, the borrower can conduct enquiries and discover the various gold loans on offer. The borrower can also get an estimate of the value of the gold in her possession.


A gold loan is one of the most instantaneous methods of acquiring money fast. By going through the above-mentioned questions, we hope that most of your doubts related to acquiring a gold loan were resolved. Do keep in mind that the most important aspect of applying for a gold loan is the credibility of the lender. Speak with people in your network who would have applied for gold loans earlier and rely on their experience.