Should You Get A Gold Loan or Sell Gold When You Need Money

Gold is a valuable metal which can be use to meet financial needs. Read to know whether you should sell your gold or opt for a gold loan.

28 Oct,2022 07:20 IST 15 Views
Should You Get A Gold Loan or Sell Gold When You Need Money

Gold, the glittery yellow metal, remains synonymous with affluence, prosperity, and status. People flaunt it to showcase their wealth. While many still adore gold for its beautiful and rich aesthetics, some recognise its potential as a powerful investment resource.

Gold is like a companion to help you sail through unexpected financial disruptions. Initially, people liquidated their gold assets to meet their financial requirements. However, as financial literacy increased, people started diversifying their use of gold as a crisis fund. This diversification helped popularise modern concepts like gold loans.

So, should you get a gold loan or sell it when you need funds? To make the right choice, you must understand the pros and cons of each option.

Why Should You Choose To Sell Gold For Financial Needs?


• When you sell your gold in the open market, the merchant offers a price on the total market value of the gold and not a percentage of it. The merchant weighs and tests the purity of the gold before calculating the price.
• The gold price depends on the market value prevailing on that specific day. Once calculated, the merchant cuts the making charges and disburses the balance to you.
• If you choose to sell your gold, you can save yourself from the extra burden of the interest payment attached to gold loans.


• The lender deprives you of making charges, thereby reducing the overall value of the gold.
• Merchants can scam you by modifying the gold weight or purity and thus reduce its value.

Why Choose Gold Loans For Quick Cash?


• Swift Loans:

Technology intervention helps lenders to reduce the burden of complicated paperwork involved in loan sanctioning. Upon successfully verifying your ID proofs and other important documents, the lender quickly processes your loan amount into your account.

• Flexible Repayment Schemes:

Gold loan providers offer several repayment options. You can pay the loan in whole or part based on your financial ability. Lenders also allow you to choose your EMI payment schedules.

• Low-Interest Rate:

To secure a gold loan, you must pledge your gold assets as collateral with financial institutions. As these are secured loans, the interest rate is low. However, various factors influence the interest rate and, thereby, your EMI amount.

• Collateral Safety:

Lending institutions ensure the complete safety of the customers’ pledged gold assets. They store assets in specialised lockers. Some lenders also offer insurance coverage for the pledged assets.

• Less Scrutiny:

Gold loans are secured loans. The lenders do not explicitly rely on your credit history when assessing your eligibility. You can be an unemployed individual and still procure a gold loan.


• In the case of gold loans, financial institutions only offer 75%-90% of the gold’s worth as the loan amount.
• Financial institutions can charge interest as high as 15% annually on gold loans.
• Sometimes, people fail to pay interest and loan amounts within the stipulated time. In such cases, the lender seizes the collateralised gold and liquidates it to secure the pending loan amount.

Gold is one of the most trustworthy investment resources during financial crunches. However, choosing between gold loans and selling gold to meet cash requirements depends on your preference. Each option has perks and limitations, and you must consider them before making an appropriate choice.


Q1. What to do before selling gold?
Ans. Before you plan to sell your gold, test its purity, weight, and market rate. It will help you assess the approximate loan amount you can fetch from the lender.

Q2. Where can I use my gold loan?
Ans. Unlike other collateral-based loans, there are no restrictions on the purpose of using the gold loan. Therefore, you can spend the amount to cover any expense.

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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