5 Important Things To Consider When Applying for Gold Loan

The gold loan has remained one of the popular options to meet your financial requirements. It enables you to access funds almost instantly and cover the cost of expenses, such as medical emergencies, education, travel, home renovation, car repair, etc. There is no restriction on how to use the sanctioned loan amount. Also, since the value of the gold is high in the gold market, you can always secure a higher loan amount. 

The best part is that most lenders do not consider credit scores to approve your application. However, if you wish to secure a lower gold loan interest rate, your rating has a crucial role to play. Repaying any type of loan has certain implications on your financial future, so you will have to be cautious when applying for a loan.  

Here are the top things to consider when applying for a gold loan: 

  • Loan amount 

The loan amount depends on the valuation of the gold you pledge as collateral. Most lenders off up to 75% of the gold’s value as a loan. You can not secure the entire gold value as a loan. You can secure up to Rs. 30,00,000-/ or more, depending on your loan. However, that does not mean you should apply for a higher loan amount. Getting a higher amount always leads to a higher interest rate. If you wish to secure a lower gold loan interest rate, assess your needs and apply for an amount you need – preferably lower than what is offered. 

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  • Interest rates

Your interest rate is determined based on the lender’s risk assessment. For instance, before approving a gold loan interest rate, your lender considers factors such as income, loan amount, current financial obligations, etc. The interest rate on a gold loan usually varies between 9.5% to 25%, depending on your lender. So, while applying for a gold loan, make sure to compare the interest rates offered by different lenders. You can choose an interest rate that best serves your needs. 

  • Processing fees 

The interest rate is not the only cost associated with a gold loan. You will also need to incur a nominal processing fee to get a gold loan. Some lenders charge up to 2% of the total loan amount as processing fees, while others do not have such fees. So, before applying for a gold loan, it is imperative to check the processing fees. It can be a significant amount if you are opting for a higher loan amount. 

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  • Loan  tenure 

Generally, gold loans are short-term loans. It means that the repayment tenure can range between 3 months to 3 years. You have the luxury to choose a loan tenure based on your preferences. You will need to ensure timely repayments. Besides the usual EMI mode of payment, you can choose to repay the whole interest in advance and the loan amount at the end of the loan tenure. 

Even though the alternative repayments cancel out the need to make monthly payments of interest rate and principal amount, you must choose an option that best serves your needs. If you are opting for a higher loan amount, it is advisable to opt EMI mode of payment. 

  • Lender’s credibility

While conducting your research on gold loan lenders, you will find lenders who would offer gold loan interest rates that are too good to be true. You must be wary of such lenders, as they can be a fraud. After handing over your gold jewellery to the lender, there is less or no paperwork involved. Your gold items give the lender assurance and confidence that you will repay the loan amount.  

But, what about your confidence? You do not have any concrete guarantee from the lender that your gold will be safe with them. So, while applying for a gold loan, check your lender’s credibility. You can check their credential or ask for documents proving their legitimacy. Make sure to choose a reputed lender to ensure the safety and security of your gold items.  


A gold loan is an easiest and quickest way to access funds to meet your financial requirements. The best part is there is no minimum documentation and eligibility requirement to apply for a gold loan. For instance, you will need to prove to your lender that you are either a salaried employee of an organization or a self-employed professional. You must show a minimum income based on your lender’s requirement.  

While applying for a gold loan, you must assess your needs and repayment capacity to make an informed decision.