How To Take A Gold Loan Against Your Ornaments

The weight and purity of the gold determines the amount of loan that is disbursed. Read to know how to take a gold loan against your ornaments at IIFL finance.

8 Nov,2022 09:21 IST 242 Views
How To Take A Gold Loan Against Your Ornaments

People frequently find themselves in situations when they need cash due to some emergency or to fund some long-desired need like house renovation etc. A gold loan might be quite helpful in these situations.

In essence, a gold loan is a secured loan in which borrowers pledge their gold ornaments or even gold coins as security to obtain cash from a bank or non-banking financial companies (NBFCs).

The gold offered as collateral can be reclaimed by the borrower after full repayment of the loan.

As gold loans are provided only on the basis of a collateral, the credit history of the borrower is not of much concern for lenders. The rate of interest on gold loan is also usually attractive as the lender is assured of full repayment, even in case of default by the borrower.

The relative ease with which a gold loan can be obtained is its best feature. Prospective borrowers can even complete the full procedure online from the websites of reputed lenders.

Loan Amount

The weight and purity of the gold that is pledged determine the amount of loan that is disbursed. The amount is directly linked to the market price of the gold at the time of pledging. Ornaments with purity of less than 18 carats are usually not accepted for a gold loan by the majority of lenders.

Borrowers must also be aware of the loan-to-value, or LTV, ratio, which is crucial in gold loans. After evaluating and confirming the gold's purity, this ratio is the maximum amount the lender will advance as a percentage of the value of the gold pledged by the borrower.

So, if a person were to pledge gold ornaments worth Rs 10 lakh and the lender provides a loan-to-value ratio of up to 60%, then the loan amount is capped at Rs 6 lakh. But if another lender offers a loan-to-value ratio of 80%, then the maximum amount of gold loan will rise to Rs 8 lakh. 
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The Procedure

A person has to first fill an application, either at a branch of the lender or their website. Most reputable lenders provide people the facility of online application for gold loan. Applicants will need to upload basic know-your-customer (KYC) documents like Permanent Account Number, Aadhaar card, bank account number, and address proof. Even a photograph can be submitted online for application purpose.

After filing the application, officials of the lender contact the person for evaluating the gold that is being pledged. This evaluation is physical, but most lenders will offer the option of the procedure being carried out at the borrower’s residence. Otherwise, the applicant can visit the nearest branch office of the lender.

This evaluation is a quick process that often just takes a few minutes. The lender’s executives will decide how much money can be granted as a loan after evaluating the purity of the gold, its weight and current market price. The pledged gold is kept with the lender and the money is disbursed into the borrower’s bank account, mostly within a day.


After the disbursement, the lender will fix an equated monthly installment, or EMI, for the gold loan. Borrowers have to make sure that they keep repaying the money on time. Delays and default can allow the lender to retain the pledged gold. Conversely, once they clear their dues, borrowers can revoke the pledge and take back their ornaments.

It is also important to pay on time, as any default or delay will also show on the credit score, making it tough to take any non-collateralised loan in future.


Gold loans offer a simple and fast way to get funds and that too at a low rate of interest. To obtain a gold loan, it is recommended to turn to established banks, NBFCs, and specialized gold-loan firms rather than local moneylenders who charge very high rate of interest.

In this digital age, you don’t even have to go to a branch to take a gold loan. Most banks and reputed NBFCs such as IIFL Finance offer you the facility of availing a loan through an online process. 

To take a loan from IIFL Finance, all you have to do is go to its website, register, fill in your key details such as address and bank account details, and a company representative will come to your home to complete the process. 

IIFL Finance gold loans come with competitive interest rates to help you raise funds instantly. The gold loan process and the repayment are also customised to offer unique features to cater to all of your capital needs.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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