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Essential Guide To Gold Loans: What To Know Before Pledging Your Jewellery
- •Gold loans let borrowers raise funds quickly against jewellery for business, education, healthcare, and personal needs without selling the asset.
- •Borrowers must compare interest rates, processing fees, loan-to-value limits, and repayment terms across lenders rather than assuming gold loans are always cheaper than personal loans.
- •Under RBI rules, the maximum LTV ratio depends on the loan size and valuation, meaning higher gold prices do not automatically guarantee a proportionally larger loan.
- •Flexible repayment options range from monthly instalments to bullet repayments, but failing to meet obligations can lead to the auction of the pledged gold.
- •Before signing an agreement, borrowers should understand purity assessment methods, default provisions, notice procedures, and how to recover their jewellery after full repayment.
Key Questions Answered
Gold loans are secured against pledged jewellery you already own, whereas personal loans are generally unsecured. Borrowers should compare interest rates, processing fees, documentation requirements, processing times, tenures, and repayment conditions across both options, as a gold loan is not automatically cheaper or faster.
Under the RBI's Lending Against Gold and Silver Collateral Directions, 2025, the maximum LTV for eligible consumption loans of up to ₹2 lakh is 85%, subject to applicable conditions. The permitted LTV varies by loan size, and the maximum ratio should not be treated as a guaranteed loan amount.
If a borrower does not repay the loan according to the agreement, the lender may initiate an auction of the pledged gold to recover outstanding dues, subject to applicable rules and procedures. Borrowers should understand the default and auction process, including notices and charges, before taking the loan.
