Question 1

What is a Gold Loan?

Accepted Answer

A gold loan is a loan where you keep your gold as collateral. You can take a gold loan from Rs 10,000 to 1 crore for a maximum tenure of 3 years(usually). A gold loan comes both with overdraft facility and EMI option.

Question 2

Is a co-signor/guarantor/co-applicant required for a gold loan?

Accepted Answer

Since applicants are keeping gold as security; hence they don't need any guarantor for a gold loan.

Question 3

What is the rate of interest on a gold loan?

Accepted Answer

Interest rates and processing fees vary from one bank to another. Usually, the interest rate on a gold loan ranges from 7% to 13%.

Question 4

How do I apply for a Gold Loan?

Accepted Answer

The steps to apply for a gold loan include:

Visit a bank and apply for a gold loan.
Pledge your gold articles against the required loan amount
Lender checks the purity of your gold
Submit KYC documents
Your loan amount will be granted and sent to your account if approved.
Being collateral security, a soft credit check is done.

NOTE: Loan amount is typically up to 80% of gold value

Question 5

What are the Documents Required for a Gold Loan?

Accepted Answer

Applying for a gold loan doesn't require complex documentation. Based on your pledged gold, you can submit your KYC and get quick loan approval from the lender.

Question 6

How do I Part-close/Foreclose/Repay/Close my Gold Loan?

Accepted Answer

All gold loans come with the option to foreclose your loan account. Hence, you can close the loan account without any part-closure/foreclosure fees.

NOTE: Some lenders do charge a foreclosure fee if the gold loan is foreclosed within 3 months

Question 7

What is a gold loan's processing time/TAT/turnaround time?

Accepted Answer

Usually, a gold loan is approved and disbursed within a few hours from the time the gold is valued.

Question 8

Is it advisable to take a gold loan?

Accepted Answer

You must know the merits and demerits of taking a gold loan. Below are the advantages of taking a gold loan:

Available to people with low CIBIL scores
Quick processing
Low-interest rate
Provide gold safety alongside loan
No foreclosure charges

However, there are a few disadvantages of taking a gold loan:

Bank usually offers you loans only up to 80% of your gold value.
In case you fail to repay the loan, the bank can liquidate your gold.

Question 9

If you miss your payments, can the lender sell your gold?

Accepted Answer

Yes, in case you fail to pay the loan on time, banks have the right to liquidate your gold to recover the debt.

Question 10

Can I take a gold loan from 2 banks?

Accepted Answer

You can get a gold loan from multiple lenders based on your available gold assets. Lenders provide you loans based on your ability to pledge gold as collateral.

Question 11

Is insurance mandatory for a gold loan?

Accepted Answer

No, insurance isn't mandatory with a gold loan.

Question 12

How is gold loan eligibility calculated?

Accepted Answer

Usually, the gold loan eligibility is calculated based on the type of gold and the weight of the gold that is available to pledge.

Once the amount of gold is known, loans are typically sanctioned upto 80% of the gold value.

Question 13

How can I reduce the EMI on a gold loan?

Accepted Answer

You can get an overdraft facility on yor gold loan to pay excess money that you have. This will help to reduce the interest burden on your gold loan.

Question 14

What are the reasons for the rejection of my gold loan?

Accepted Answer

Low-quality gold assets are the major reason behind gold loan rejection. The source of the gold should also be explained by the applicant.

Question 15

Can I take an overdraft/OD on my gold loan?

Accepted Answer

Yes, a gold loan comes with an overdraft facility and EMI option.

Question 16

What types of gold can I pledge to get a gold loan?

Accepted Answer

You can pledge any type of jewelry or gold ornament to get a gold loan. However, you can't get a loan against bullion (bars etc).

Question 17

What can I use a gold loan for?

Accepted Answer

You can use the gold loan for debt consolidation, payment of medical bills, emergency fund requirements, or anything you need it for.

Question 18

What is the tax treatment on a gold loan?

Accepted Answer

You commonly claim a tax rebate on a gold loan if the amount is used for home renovation. Else, you don't get any tax benefits.

Question 19

Can I transfer a gold loan from one bank to another?

Accepted Answer

Yes. All banks allow you to transfer gold loans from one institution to another.

Question 20

What does a bank do with the gold taken in a gold loan?

Accepted Answer

All the gold pledged under a gold loan is secured in a safe deposit vault with high-end security measures.

Gold Loan Frequently Asked Questions (FAQ)