How to Avail a Gold Loan — A Step-by-Step Guide

The process to apply for gold loan online is convenient, time saving & effortless. Know the documents required & steps to apply for gold loan with IIFL Finance!

11 Jun,2022 09:16 IST 224 views
How to Avail a Gold Loan — A Step-by-Step Guide

How to Avail a Gold Loan — A Step-by-Step Guide

A gold loan is a secured loan. It is similar to a mortgage loan as the borrower keeps their gold as collateral with a lender and avails capital. 
Generally, a gold loan has a shorter term, with the tenor typically ranging from three months to 24 months. In the case of a gold loan, the interest rate is lower compared to some other forms of loans. 
The interest rates on gold loans are currently in the 7.5%-12% range, depending on the lender, but this could change depending on the country’s monetary policy. Typically, banks charge lower interest rates compared to non-bank lenders. 

Why is a gold loan a better option than other types of loans?

Due to faster processing and lower interest rates, a gold loan is a preferred way to borrow money. The interest rate tends to be higher if the loan amount is larger. A regular and high income will allow the borrower to get a gold loan at a lower interest rate. 
Gold loans are granted against gold jewellery and coins. The gold item is kept safe with the lender till the closure of the loan. Lenders offer up to 80% of the value of the pledged gold as the loan amount. This can be higher than say, land or real estate or other types of collaterals, where the loan offered can be lower as a proportion of the value of the asset. 

Key steps to avail a gold loan


Anyone who wants to take a gold loan needs to first apply at a bank or a non-bank lender. Applicants can either do so by going to the branch of the lender or apply online, which is the most favoured option these days in urban areas.


After you complete your application, a representative of the lender will get in touch with you. If you applied online, the representative will even come to your home to check documentation and examine the gold. All banks and financial institutions first check the purity of the gold. An appraiser determines the quality and market price of the gold to be pledged. 


The lender then completes the Know Your Customer (KYC) process as per the Reserve Bank of India’s (RBI) norms.

Approval and disbursement:

The loan is approved after the applicant agrees to the loan amount and other charges. Gold loans come with a processing fee of 0.10% to 1% of the loan amount.

What documents are required?

The applicant needs to furnish the following documents to avail a gold loan:

  • Aadhaar card.
  • Identity proof—Any one of PAN card, passport, driving licence or voter’s ID.
  • Address proof—Any one of passport, driving licence, electricity bill or gas bill.

Notably, a “proof of income” is not a mandatory document required to avail a gold loan. 

Who is eligible for a gold loan?

Any individual who has gold jewellery is eligible to apply. Some lenders also accept gold coins. The applicant should be in the age group of 18 years to 60 years. Loan against gold is granted to professionals, self-employed, business owners, and other individuals.
Moreover, a poor credit score usually doesn’t matter as this is a secured loan. 

How is a gold loan repaid?

There are basically four ways to repay a gold loan:

Pay periodic EMI:

This includes payment of both the interest and principal amount on a monthly basis.

Pay EMI first and principal later:

Follow the EMI schedule to repay the interest amount and pay the full principal amount at the time of maturity. 

Partial payments:

Make partial or even complete payment of interest and principal amounts, irrespective of the EMI schedule. You can also repay the principal amount first and then pay the total interest. 

Bullet repayment:

Repay the principal and interest amount at the end of the loan’s tenure.  

Account closure

A gold loan account is deemed closed when the borrower deposits the outstanding loan principal amount and interest amount. The lender gives the collateral gold back to the borrower and receives the acknowledgment after the closure of the loan account is confirmed.


Availing a gold loan is easy and needs minimal paperwork. Moreover, the borrower’s credit history has no bearing on the approval process, the amount or the rate of interest charged. 
While there is a wide unregulated market out there, comprising local lenders and pawn shops, it is advisable to take a gold loan from a reputable lender like IIFL Finance, as they offer a hassle-free process, with attractive interest rates and at a very nominal cost. 
More importantly, lenders like IIFL Finance keep the pledged gold jewellery safe in secure vaults so that there is no risk of theft or any damage. This ensures borrowers get their precious jewellery safely back when they repay their loan and close the account.

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