Loans taken against gold is a secured loan, and interest rate is applied when the equated monthly installment (EMI) begins. Loans taken against gold as a collateral offer a low lending rate unlike unsecured loans.
Lending institutions offer up to 75% loan-to-value (LTV) over and above basic paperwork and appraisal calculated as per the purity, weight, and the current rate of gold in the Indian market.
Here’s the latest interest rate on gold loans provided by major lending institutions, as of Oct. 31, 2023.
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Gold Loan Interest Rates in November 2023
Here are the interest rates on gold loans provided by major lending institutions of India.
Bank of Baroda
Bank of India
Bank of Maharashtra
Central Bank of India
Punjab and Sind Bank
Punjab National Bank
State Bank of India
UCO Bank
Axis Bank
HDFC Bank
Karur Vysya Bank
Kotak Mahindra Bank
South Indian Bank
IndusInd Bank
Bajaj Finserv
Saraswat Bank
The interest rates on gold loans are accurate as of Oct. 31, 2023.
Factors that Influence Gold Loan Interest Rate
Banks borrow loans against hallmarked gold ornaments over and above an appraisal check to determine the purity and weight of the metal to arrive at the gold loan amount. A number of factors can affect loan amount, and the popular ones include:
Gold weight: The amount of gold loan is related to the weight of the yellow metal.
Gold purity: Lenders provide loans on the basis of the purity of gold after the appraisal check, mainly above 18 carat.
Fluctuation in gold prices in the market: Loans against gold is directly proportional to the current market value on the basis of the metal’s purity scale.
Interest Rate Calculation on Gold Loans
Gold is priced as per the current market value, and any fluctuation on the market price will affect the floating rate of interest rate on loans against gold pledged as security. This amount is directly proportional to the purity scale and weight of the gold. Banks then add their lending rate as per the Reserve Bank of India’s (RBI) repo rate.
One of the key determinants is its loan to value (LTV) capped by the RBI, basis which a borrower will get loan against the value of gold. Banks lend a loan up to a 75% LTV of the market value of the pledged gold ornaments.
For example, if the value of gold is INR 10,000 and the LTV is 75%, the maximum loan amount the customer can get would be INR 7,500.
Features of Gold Loan
Eligibility
Above 18 years of age.
Loan amount
INR 20,000 to INR 50 lakh.
Loan Tenure
Up to 36 months
Margin
25% to 35%
Gold appraiser charges
Applicable.
Prepayment
Nil.
Frequently Asked Questions (FAQs)
How to check the value of gold?
When you loan an amount from lending institutions against gold as collateral, its weight and purity (ranging 18K to 24K) is considered as value.
Will there be any KYC checks?
Yes — Financial institutions conduct Know your customer (KYC) norms and checks as stated by the Reserve Bank of India (RBI) to get information on borrower’s details such as identity, credit history, income source, etc.
Will I get a gold loan if my credit score is low?
Yes—As gold will be pledged with the bank as security, financial institutions avail of gold loans even to borrowers with low credit scores.
How can I repay the loan against gold?
Financial institutions offer borrowers a flexibility to repay the loan principal and interest as a lump sum amount, a.k.a. bullet payments (instead of equated monthly installments, or EMIs) at the time of maturity, which is usually 6 to 36 months.
Charges related to gold loans
There are various charges associated with gold loans from banks, such as processing, gold appraisal or inspection, documentation, handling and safe-keeping. Such charges are, however, subject to deduction as per borrowers’ relationship with the bank.
Gold loan interest rate in India versus other retail loans
Loans availed against the pledge of gold ornaments and jewels as security attract low lending rate. Gold can also be served as security while availing retail loans such as home loans, car loans, education loans, among others.
How can I reduce the interest rate on gold loans?
The best ways for borrowers to get lower interest rates on gold loans include applying for a shorter repayment tenure, or bullet repayment. Most banks, like mentioned above, do not charge a foreclosure, processing fees on the loan.
