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Gold Loans: A Good option when you have a low CIBIL score

Gold Loans: A Good option when you have a low CIBIL score

  • By Saral Credit
  • June 05, 2022

India is the largest importer of gold. Indians have an incomparable love for gold, especially ornaments. With time, gold has earned a significant value in the market, turning it into a long-term asset. However, in case of a financial crisis, gold can also be used as collateral.

Yes, we are talking about gold loans available to the borrowers.

Almost every bank provides a gold loan with an interest rate between 7% to 29% per annum. Moreover, you also get the repayment tenure starting from 3 months up to 4 years. The interesting point here is that you put your gold ornaments as collateral against the emergency fund you take from the bank/lender.

Standard Gold Loan Details are:

  • Interest Rate: 7% p.a. Onwards
  • Loan Amount: Up to Rs.1.5 crore
  • Loan Tenure: 3 months onwards
  • Processing Fee: 0% - 2% of the loan amount + GST

Most of you would wonder why taking a gold loan is better than other credit facilities like personal loans, mortgage loans, etc. Below are the benefits of getting a gold loan.

Competitively Low-Interest Rate: Gold loans are secured loans, making them a low-interest rate option for the borrowers. A standard personal loan interest starts somewhere from 13%, whereas a gold loan is available from 7% onwards, which brings a big difference in the interest amount.

Zero Processing Fees: Most banks don't charge any processing fees on gold loans as they are keeping your gold as collateral.

Quick Processing: When you are depositing your gold as collateral, banks/lenders quickly provide you with a loan. Lending money against gold is a secure option as the chances of defaulting the loan is minimized to a lower end.

'Pay Only Interest' Option: Yes, you heard it right! A gold loan is one of a kind loan option where you are allowed to pay the interest only during the repayment tenure. It means you can skip paying the principal amount and repay it at the time of account closure or anytime as per your convenience.

Minimal Foreclosure Charges: Some banks either don't have foreclosure charges or have a minimum of 1% charges on your gold loan.

No Income Proof Required: Banks ask for your income proof before granting a loan, but not in the case of a gold loan. You can apply for a gold loan and submit your gold as collateral; that's it!

No Impact of Bad Credit Score: You are ineligible to get multiple loan options due to a bad credit score. However, a gold loan can be easily available as you are keeping your gold against the loan amount. Deposit of gold ornaments assures that the borrower will repay the loan amount on time, without defaulting.

Gold Security: You either need a personal locker or get a locker in your bank to secure your gold. However, your gold is protected against the gold loan under a gold loan. This gives you two benefits in a single plan.

Gold Loan Options Available in India

Gold Loan Provider

Interest Rate

Loan Amount


Manappuram Gold Loan

Up to 29% p.a.

Up to Rs.1.5 crore

3 months onwards

SBI Gold Loan

7.30% p.a. - 7.50% p.a.

Rs.20,000 to Rs.50 lakh

Up to 36 months

HDFC Gold Loan

11% p.a. to 16% p.a.

Rs.25,000 onwards (Rs.10,000 for rural areas)

3 months to 24 months

Muthoot Gold Loan

12% p.a. to 27% p.a.

Rs.1,500 with no maximum limit

7 days to 36 months

Axis Gold Loan

13.50% p.a. onwards

Rs.25,001 to Rs.25 lakh

6 months to 36 months

Canara Gold Loan

7.35% p.a.

Rs.5,000 to Rs.35 lakh

12 months - 24 months

BOB Gold Loan

9.00% p.a. - 9.15% p.a.

Up to Rs.25 lakh

12 months to 36 months

Karnataka Bank Gold Loan

8.49% p.a. - 8.79% p.a.
8.19% p.a. for Agri-based gold loan

Up to Rs.25 lakh per account

6 months to 12 months

PNB Gold Loan

8.75% p.a. - 9% p.a.

Rs.25,000 to Rs.10 lakh

As per the lender’s T&Cs.

India Infoline (IIFL)

9.48%p.a.- 27% p.a.

Rs.3,000 onwards

Up to 24 months

Kotak Gold Loan

10% p.a. to 17% p.a.

Rs.20,000 – Rs.1.5 crore

Up to 4 years

Federal Gold Loan

8.50% p.a. onwards

Rs.1,000 - Rs.1.5 crore

As per the lender’s T&Cs.

Central Bank of India

9.05% p.a. onwards (floating)

Rs.10 lakh – Rs.40 lakh

Up to 12 months

Indian Bank Gold Loan

7% p.a. onwards

Up to Rs. 75 Lakh

Up to 36 months

IDBI Bank Gold Loan

7% p.a.

Up to Rs. 20 Lakh

Up to 12 months

IndusInd Bank Gold Loan

10.00% - 16.50%

Up to Rs. 10 Lakh

Up to 24 months


Eligibility Criteria for Gold Loan

Before you apply for a gold loan, it is essential to ensure you meet the eligibility criteria for the loan. Below are the basic eligibility criteria for applying for a gold loan.

  • Age of the applicant: 18 years and above
  • Security to be pledged: Gold ornaments or articles
  • Total carats of gold that can be pledged: 18 carats or above
  • Other criteria: Applicant must be creditworthy

If you meet the criteria, you can easily apply for the gold loan

Documents Required for Gold Loan:

Below are the essential documents that you would require to apply for a gold loan:

  • Duly filled application form
  • Passport size photographs
  • Identity proof
  • Address Proof
  • Signature Proof
  • Form 60 or PAN card
  • Proof of age
  • Post-loan disbursement documents, if any

Steps to Apply for a Gold Loan

Once you acknowledge the eligibility criteria and ensure you meet the criteria, now you should know the step-by-step process of applying for a gold loan.

Step 1: Research for the Right Lender:

Numerous banks nowadays provide gold loans that bring confusion for first-time borrowers. Hence, it's essential to research well and find a legit bank/lender to get a gold loan. Moreover, you should prefer taking a gold loan equivalent to the amount you can repay quickly.

Step 2: Apply on Lenders Website:

If you meet the eligibility criteria, visit the lender's website and click on loan options. Now select 'Gold Loan' that will take your consent before proceeding further. Now submit the required details in the given form and submit it online. Your request for a gold loan has been submitted successfully.

Step 3: Visit Office if Step 2 is not available:

If you can't find the option to apply online for a gold loan, you need to visit the lender's office and make a request manually. Ensure to carry a copy of all essential documents to make the process quick and simple.

Step 4: Wait for Lender's Verification:

Every lender checks your eligibility before approving your gold loan request. You will receive the requested loan amount after keeping your gold ornaments as collateral if your application is approved.

Points to Consider When Taking a Gold Loan

Whether you are facing a financial crisis, or need emergency funds to compensate for your sudden monetary need, a gold loan is undoubtedly a better option to proceed. However, you must consider some essential points to get the best gold loan.

Check Loan Amount: Remember the loan amount you demanded will depend upon your current gold value. So, you should ensure that you have enough gold ornaments to equate to your loan requirement. Moreover, lenders have minimum and maximum loan amounts that you must note before applying.

Check Interest Rate: Yes, different lenders offer different interest rates on the gold loan. Gold loan interest rates are lower than other loan facilities as you keep your gold ornaments as collateral. Yet, the interest rate varies from lender to lender, which you must consider before shortlisting one.

Check Additional Charges: Numerous other charges are associated with applying for a gold loan. Lenders can add charges like processing fees, documentation fees, loan default fees, overdue fees, etc., that aren't calculated in the total loan amount. Hence, you must check the list of additional charges associated with your loan account; before applying for the loan.

Check Loan Tenure: The standard loan repayment tenure is between 3 months to 48 months. So, you should take a loan that is easy to repay within the given timeframe.

Check Lender's Credibility: The lender's credibility is a must before you move ahead with the documentation process. You should thoroughly research the lender and ensure its trustworthiness, customer service, and other customer-centric facilities. Prefer checking their portfolio to ensure the lender is legit and has a long background.

Compare Different Lenders: Before you proceed with your documentation with a lender, it's crucial to compare multiple lenders and ensure you have shortlisted the one offering a low-interest rate and minimal additional charges.

Check Your Eligibility: It's highly recommended to ensure you meet the eligibility criteria notified by the lender. Applying for a gold loan without knowing the eligibility criteria can consume your time and effort.

Now you have sound knowledge about the gold loan along with top gold loan providers in India. Research well and choose the right lender!