Gold Loan in Pune

Are gold loans secured or unsecured? Understand the key difference

If you are thinking about taking a gold loan, one question may cross your mind right away. Is a gold loan secured or unsecured? The answer is simple and important for you to understand. A gold loan is a secured loan because you pledge your gold jewellery as collateral to get funds.

Since your gold acts as security, lenders face less risk. This works in your favour through lower interest rates, quicker approval, and a smoother loan process. You do not need to rely heavily on your credit score, as the value of your gold plays a bigger role. The lender keeps your gold safe until you repay the loan in full.

Knowing that a gold loan is secured helps you choose a reliable and cost-effective way to meet your financial needs with confidence.

Is a gold loan secured or unsecured?

Gold loans are unequivocally classified as secured loans. This classification is based on the fact that borrowers provide physical gold as collateral to secure the loan amount. In the event of default, the lender has the right to liquidate the pledged gold to recover the outstanding loan amount. This security significantly reduces the risk for lenders, allowing them to offer lower interest rates compared to unsecured loans.

The security of the loan also benefits the borrower. Because the loan is secured by a tangible asset, lenders are more willing to offer higher loan amounts and flexible repayment terms. Additionally, the approval process for gold loans is typically faster and less stringent than that for unsecured loans, which often require extensive credit checks and documentation.

Understanding gold loans

A gold loan is a type of secured loan where the borrower pledges their gold ornaments as collateral to the lender in exchange for a loan amount. The loan amount is usually a percentage of the gold’s current market value (as per IBJA). Borrowers can use the loan for various purposes, such as funding education, medical emergencies, business expansion, or any other personal needs.

The process of obtaining a gold loan is relatively straightforward. Borrowers need to present their gold assets to the lender, who will evaluate the gold's purity and weight. Based on this assessment, the lender will determine the loan amount that can be sanctioned. Once the loan is approved, the gold is safely stored by the lender until the loan is fully repaid. Interest rates on gold loans are generally lower compared to unsecured loans like personal loans, making them an attractive option for borrowers seeking quick and affordable credit.

How do gold loans work?

Gold loans provide a quick and efficient way to obtain funds by leveraging gold jewellery. Here is a step-by-step breakdown of how gold loans work:

• Online application: To apply for a gold loan, you just need to fill out an online application form. You need to provide all the necessary details in the form and submit. Or if it suits you better, you can also visit the nearest gold loan branch of to avail of the loan offline.
• Evaluation of gold jewellery: This is where the gold loan process is different from that of other financial products. After applying for credit, the gold pledged as collateral will be evaluated using the state-of-the-art karat metres to assess its purity and weight, considering the prevailing gold price. Based on this evaluation, we determine the exact loan amount that an individual is eligible for.
  Here, you must note that RBI has capped the LTV ratio of a gold loan. Lenders extend the loan amount to the applicant based on the evaluation and market price of pledged gold. Currently, Bajaj Finance only accepts gold jewellery worth 18-22 karats as a collateral against the loan. In this regard, you can use a gold loan calculator beforehand to assess repayment liability. This online tool displays accurate results within seconds and allows you to plan and manage your finances efficiently.
• Eligibility and documentation: The next step on how this credit facility works is the eligibility and documentation. Being a secured credit option, gold loans do not impose strict eligibility and documentation. However, you need to be an Indian citizen, aged between 21 and 80 years, to avail of this loan. You would also need to provide your basic KYC document for gold loan and address proof to complete the verification process.
• Credit approval: After evaluating gold articles, documentation and signing of a loan agreement, the credit disbursal process begins. Finally, borrowers will receive their desired loan amount into their registered account. The entire gold loan process from application to disbursal takes a few hours to complete and ensures a hassle-free loaning procedure.

Why are gold loans considered secured?

Gold loans are considered secured loans because they are backed by collateral, specifically gold assets, which significantly reduces the lender's risk. When a borrower takes out a gold loan, they pledge their gold jewellery to the lender as security. This collateral serves as a guarantee for the loan amount, ensuring that the lender has a tangible asset to fall back on in case the borrower defaults on their repayment.

The primary reason gold loans are classified as secured is the presence of this physical collateral. Unlike unsecured loans, such as personal loans or credit card advances, which rely solely on the borrower’s creditworthiness, gold loans are underpinned by a valuable asset. This reduces the lender's risk exposure, as they can recover the outstanding loan amount by selling the pledged gold if the borrower fails to repay.

Benefits of taking Gold Loans

Gold loans offer a range of advantages, making them an attractive financial solution for many individuals. Here are the key features and benefits of gold loans in:

• Partial release facility: Borrowers have the option to repay a portion of their loan and retrieve some of their gold jewellery before the end of the loan term, offering greater financial management flexibility.
• No prepayment or foreclosure charges: Gold loans in do not have any charges for prepayment or foreclosure, allowing borrowers to repay their loans early without extra costs, thus reducing their overall interest expenses.
• Accurate gold evaluation: Advanced karat meters ensure precise and fair assessment of the gold's purity, guaranteeing that borrowers receive the best possible value for their gold.
• Complimentary gold insurance: Gold loans include free insurance coverage against theft or loss of the gold while in the lender's custody, providing borrowers with added security and peace of mind.
• Multiple repayment options: Borrowers can select from various repayment plans, including monthly, bi-monthly, quarterly, half-yearly, or annual interest payments, with the principal amount due at the end of the loan term.
• Simplified application process: The application process for gold loans is easy and hassle-free, with options to apply online and assistance from customer representatives at local branches.
• Easy application process: Apply for a gold loan online. Our customer representative will help you with your application when you visit our Gold Loan branch in your city.
• Gold loan of up to Rs. 2 crore: We offer gold loans starting from Rs. 5,000 up to Rs. 2 crore. You can choose the amount that suits you best from the offer extended to you.
• 1100 branches and growing: We have just opened 60 new branches and are adding more all over India. Additionally, we are opening new branches in the cities where we already have operations.

These features and benefits make gold loans an efficient and advantageous financial solution for residents of Nellore, ensuring they receive quick access to funds with minimal inconvenience.

Differences between secured gold loans and unsecured loans

When comparing gold loans with unsecured loans, it is important to understand how each option works. The key factor lies in whether the loan is backed by collateral. Here's a detailed comparison:

In short, gold loan is secured or unsecured is a common question. Gold loans are secured loans since they involve pledging your gold assets. In contrast, personal loans are unsecured, which makes them more flexible but also more expensive in terms of interest rates. Borrowers must evaluate their assets, urgency, and repayment ability before choosing between the two.

Discover your borrowing potential by checking your gold loan eligibility. It takes just a few clicks and no waiting.