Relation Between Gold Loan & Your CIBIL Score 

Gold loan is a secured loan against your gold. Does gold loan impact your cibil score? Read to know about relation between gold loan and cibil score.

17 Nov,2022 11:07 IST 3 views
Relation Between Gold Loan & Your CIBIL Score 

In a life full of surprises, financial crunches are the most common hindrances that shatter your life goals. Managing such turbulence brings you two choices: using your savings or taking loans. The CIBIL score is the most potential parameter used by financial institutions to determine your ability to repay the loan.

Gold loans are the most feasible for fulfilling immediate monetary requirements among various loan options. However, credit scores have zero to no importance in deciding your eligibility for gold loans. Yet, there exists a strong connection between CIBIL scores and gold loans. The two are interdependent and interrelated to each other in multiple aspects.

Relation Between Gold Loans and CIBIL Scores

Gold loans involve a lending arrangement where you pledge your gold assets as collateral with banks and NBFCs to secure loans. Here, the lender values the market price of your gold and releases 75%-90% of its worth as a loan.

As gold loans are secured debts, the risk involved for the lenders is low; thus, they give less relevance to credit scores. That’s why you quickly get a gold loan against the pledged assets at competitive interest rates, flexible EMIs, and a convenient repayment period.

While your CIBIL score might not significantly affect your gold loan eligibility, the repayment pattern is essential in improving your credit rating. Below are vital points to understand the impact of gold loans on credit scores.

• Gold Loan Applications

Lenders carry out two inquiry types: a soft inquiry for self-inspection, which does not affect your credit score, and a hard inquiry, performed by FIs during loan sanctions. These inquiries can negatively affect your CIBIL score if conducted multiple times, as it portrays you as a credit-hungry client who borrows more than needed. It will likely spoil your credit score further and reduce your chances of securing a new loan.

• Gold Loan Repayments

Satisfying the loan obligations per the schedule improves your credit score, whereas any failure quickly hurts the score. You can pay your instalments early or on time to boost your credit score. Those who repay their loan EMIs on time hold a better reputation in the lending market than those who are erratic with their debt payments. Lenders favour providing gold loans to debtors who have impressive creditworthiness.

Your CIBIL score falls when you default in repaying your gold loan. Credit rating agencies keep track of loan defaulters and include such information in their credit reports. Each negative point in your credit report spoils your credit score substantially.

If you repay the loan within 30 days of default, the impact on your credit score is less as you only have to bear the burden of late payment charges and a few other fines. But, if the default continues for more than 90 days, your loan account becomes a Non-performing Asset (NPA). The title deteriorates your image as a debtor and poses restraints to your ability to secure a loan from financial entities.


Gold loans are an excellent option for procuring funds from financial lenders at affordable interest rates. These loans come conveniently even for someone with a poor credit score as they are secured debts, and lenders do not have much at stake. However, your dedication towards repayment of your loan amount can help you push your credit score quickly.


Q1. What happens when a gold loan becomes an NPA?
Ans. When a gold loan account becomes an NPA, the lender auctions the pledged gold to recoup the loan amount. The financial lender must inform the loan-taker about the auction procedure beforehand.

Q2. How many times can I take a gold loan?
Ans. You can take a gold loan at your convenience without bothering about the frequency of the loan. There is no official limit on the times you can take a gold loan.

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