A Gold Loan works by pledging eligible gold jewellery or ornaments as collateral to access funds. The process typically involves checking your gold, submitting KYC documents, getting the gold valued, reviewing the loan offer, receiving the approved amount, and repaying it as agreed to get your pledged gold back.
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In summary
- A gold loan lets you borrow against eligible gold jewellery without selling it.
- The process includes gold evaluation, KYC verification, loan approval, and quick disbursal.
- Choose from multiple repayment methods based on your financial needs.
- Understanding the eligibility criteria for gold loan.
Knowing how gold loan works helps you make informed borrowing decisions. With minimal documentation, competitive interest rates, and multiple repayment options, a gold loan offers a convenient way to access funds while retaining ownership of your pledged gold.
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Why gold loans are a trusted financial option in India
Gold in India is more than just a shiny piece of jewellery; it is a part of our traditions, celebrations, and security blanket in tough times. Beyond its beauty and status, gold holds a special place because it can be used as collateral for a loan when quick funds are needed. Over the last few years, especially after the pandemic, more people have turned to gold loans as a practical solution during financial challenges. This rise is not surprising, given gold’s steady value and reliability. If you want to make the most of this option, it is important to understand how the gold loan process works in India and how it can help you in times of need.
What is a gold loan?
A gold loan is a secured loan where you pledge eligible gold jewellery, ornaments or accepted gold coins as collateral to borrow funds without selling your gold. The lender assesses the purity, net weight and applicable gold value to determine the eligible loan amount and applies the relevant LTV ratio. You repay the loan through the agreed repayment option along with applicable interest and charges. Once the outstanding dues are cleared, your pledged gold is returned. Gold Loans can be used to meet various financial needs, including medical expenses, education, or personal expenses.
Additionally, facilities like attractive gold loan rate per gram, minimal documentation, multiple repayment tenures and hassle-free disbursal, makes gold loans a reliable source of quick finance from Rs. 5,000 to Rs. 2 crore.
Quick tip: Do not let your jewellery sit idle—tap into its value with a gold loan that suits your needs. Check your gold loan eligibility today!
How does a gold loan work?
A loan against gold is a unique credit option because of its working principle. Here is how gold loan works:
Step 1: 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 to avail of the loan offline.
Step 2: Evaluation of gold
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.
Step 3: RBI cap on LTV for gold loans
Here, you must note that RBI has capped the LTV ratio of a gold loan up to 85%. Lenders extend the loan amount to the applicant based on the evaluation and price of pledged gold. Currently, Bajaj Finance only accepts gold jewellery or ornaments worth 18-22 karat and gold coins up to 24 karat purity 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.
Step 4: 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 to 80 years, to avail of this loan. You would also need to provide your basic KYC documents for gold loan to complete the verification process.
Step 5: 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 often takes just one branch visit to complete and ensures a hassle-free loan procedure.
Please note, Bajaj Finance uses the lower of the previous day's closing price or the 30-day average closing price published by IBJA or a SEBI-regulated commodity exchange. This helps ensure a fair and transparent assessment of your gold jewellery, ornaments, or coins.
Curious about your loan eligibility? Enter your mobile number to see how much you can get for your gold.
What is the interest rate on which lenders give the gold loan?
The interest rate on a gold loan depends on the lender, the loan amount, and the repayment terms. For Bajaj Finance Gold Loan, the interest rate usually starts from as low as 9.50% to 24.25% per annum, but it can vary based on the gold’s purity, loan-to-value ratio, and repayment schedule chosen by the borrower.
These loans generally have lower gold loan interest rate compared to unsecured loans because your gold acts as security. Since lenders have the gold as collateral, they take less risk, which helps in offering better rates. With Bajaj Finance, you also get multiple repayment options, like paying interest regularly and the principal at the end of the tenure. The gold loan interest rate depends largely on:
- Purity and net weight of your gold
- Market price of gold
- Loan amount and chosen tenure
To know the exact rate applicable to your requirement, you can check your gold loan eligibility online or visit the nearest Bajaj Finance Gold Loan branch.
How is gold loan interest calculated?
When you take a gold loan with Bajaj Finance, the interest is calculated based on the loan amount, applicable interest rate, and chosen repayment tenure. Since gold loans are secured by eligible gold jewellery, they generally offer lower interest rates than many unsecured loans. You can also use the gold loan calculator to estimate your interest payable and repayment amount before applying.
For example, if the value of the collateral is ₹2 lakh and the applicable LTV is 85% for exposure below ₹2.5 lakh, at 24% annual interest on 22 Karat gold and gold rate (as per carat ) considered 13,200 RS.- the total eligible loan amount (including interest) is ₹1.70 lakh
- For 12 months tenure , interest is ₹32880
- For 6 months tenure , interest is ₹16,440
- For 3 months tenure, interest becomes ₹8,220
The actual interest payable may vary depending on your repayment option, loan tenure, and the applicable gold rate. Understanding this calculation helps you plan your repayments and manage your borrowing more effectively.
Repayment options for a gold loan
Bajaj Finance offers multiple repayment options for gold loans, making it easy for you to manage payments:
- Bullet repayment: Pay the principal amount at the end of the loan tenure, on the maturity date.
- Regular repayment: Repay the loan as per the agreed schedule, such as monthly, bi-monthly, quarterly or half-yearly.
- Partial prepayment or foreclosure: Allows early repayment without paying any extra charges.
These options give you freedom to choose a plan that fits your financial situation while keeping repayments manageable.
Benefits of availing a gold loan
A Gold Loan can help you access funds by pledging eligible gold without selling it. With Bajaj Finance, you can choose features designed to make borrowing and repayment easier.
- Access funds conveniently: Borrow from Rs. 5,000 up to Rs. 2 crore, subject to eligibility and applicable terms.
- Choose repayment options: Pay interest monthly, bi-monthly, quarterly, half-yearly or annually, as applicable.
- Keep your gold: Your pledged gold remains yours and is stored securely with complimentary insurance during the loan tenure.
- Repay early if needed: Bajaj Finance allows full or part prepayment without additional prepayment charges.
- Use part-release: Repay part of the loan and release a portion of your pledged before the tenure ends, subject to eligibility.
Overall, a gold loan is a safe, fast, and convenient way to meet financial needs without selling your jewellery.
What type of gold jewellery can you submit as collateral?
With Bajaj Finance, you can pledge eligible gold jewellery, ornaments and coins as collateral for a gold loan. As of now, gold bars, idols, utensils and gold-plated items are not accepted.
| Gold type | Accepted as collateral? |
|---|---|
| 18-22 karat gold jewellery | Yes |
| 18-22 karat gold ornaments | Yes |
| Gold coins up to 24 karat purity | Yes |
| Gold bars | No |
| Gold idols | No |
| Gold utensils | No |
| Gold-plated items | No |
It is important to know that only the intrinsic gold value is considered during valuation; stones, gemstones and other non-gold components are excluded.
Pro tip: Check your gold loan eligibility to find out how much you may be able to borrow against your eligible gold jewellery.
Are 'gold loan settlements' paid at maturity or can they be refinanced earlier?
A gold loan settlement is an arrangement between the borrower and lender to close an outstanding Gold Loan by paying an agreed settlement amount, usually when the borrower is unable to repay the loan as originally scheduled. Understanding how gold loan works helps you decide whether to repay your loan at maturity or opt for renewal before it ends.
The available option depends on your lender's policy, your loan status, and applicable regulatory guidelines.
- Repayment at maturity: You can repay the outstanding principal along with any pending interest by the loan maturity date and retrieve your pledged gold.
- Renewal/refinancing: Some lenders allow eligible borrowers to renew or refinance their gold loan before maturity, subject to applicable LTV limits, credit assessment, and lender policy. Fresh charges may apply.
- After maturity: Renewal or refinancing is generally not permitted once the loan has matured.
- Plan ahead: Reviewing your repayment options before the due date can help you avoid delays and additional charges.
How does gold loan work as a financial emergency tool?
When unexpected expenses arise, understanding how does gold loan work can help you access funds quickly without selling your gold. Since a gold loan is secured against eligible gold jewellery, the approval process is usually faster than many unsecured loans and requires only basic KYC documentation.
- Quick disbursal: After your gold is evaluated and documents are verified, the loan is often processed within a single branch visit.
- Minimal paperwork: Basic KYC documents are generally sufficient, making the process simple.
- Immediate financial support: The funds can be used for medical emergencies, education, business needs, or other urgent expenses.
- Retain ownership: Your pledged gold is returned once the loan is repaid in full, allowing you to meet emergency needs without permanently parting with your valuables.
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Eligibility for gold loan
Anyone can apply for our gold loan, as long as they meet the basic gold loan eligibility criteria mentioned here. They will be asked to submit a few basic documents to complete their application process.
Eligibility criteria for gold loan
- Be an Indian citizen
- Be aged between 21 to 80 years
- Have 18-22 karat gold jewellery or ornaments to pledge
- Have gold coins up to 24 karat purity
Documents required for gold loan
- Aadhaar card
- Voter ID card
- Passport
- Driving licence
- NREGA job card
- Letter issued by National Population Registration
PAN card is not required. However, if you apply for a gold loan of Rs. 5 lakh or above you will be asked to submit your PAN card.
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How to apply for a gold loan
Applying for a gold loan with us is quick and easy. You can either visit the nearest Bajaj Finance Gold Loan branch or apply online through the Bajaj Finance App or official website from the comfort of your home. To apply online, just follow these easy steps:
- Click on “Apply” to initiate online application.
- Enter your 10-digit mobile number and click on “Get OTP.”
- Submit the OTP to verify your identity.
- Fill in your personal details and select the nearest gold loan branch.
- Download In-principal loan eligibility letter.
Once done, you will receive a call from our representative and guide you on the next steps.
Check your gold loan eligibility in seconds to know how much you can borrow easy, accurate, and hassle-free.
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Frequently asked questions
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How do lenders determine the gold loan amount?
Lenders determine the gold loan amount based on the value and purity of the gold you provide as collateral. At Bajaj Finance, we assess the gold's weight and purity, and then offer a loan amount as a percentage of the gold's value. The higher the gold's purity and weight, the more you can borrow for your gold loan. You can receive up to 75% of your gold’s value as per the guidelines set by the RBI.
How can the gold loan be repaid?
We offer multiple gold loan repayment options where you may choose to repay your gold loan interest on a monthly, bi-monthly, quarterly, half-yearly, or annually basis as per your convenience. Please note that the principal amount and pending interest, if any, will be due for payment at the time of loan maturity.
How is the loan amount determined for a gold loan?
The loan amount depends on the purity and weight of your gold. Bajaj Finance uses accurate machines to check your gold’s value. You can get up to 75% of the gold’s market value as a loan.
What happens if I fail to repay my gold loan?
If you miss payments, Bajaj Finance gives ample reminders. If the loan is not cleared even after the grace period, the pledged gold may be auctioned to recover the amount. It is important to repay on time to avoid losing your gold.
What is a gold loan and how does it work in India?
A gold loan is a secured loan where you pledge eligible gold jewellery, ornaments or coins as collateral to borrow funds without selling it. To understand how gold loan works, the lender first checks the purity and weight of your jewellery, values it using applicable regulatory guidelines, and determines the eligible loan amount based on the permitted loan-to-value (LTV) ratio. Once approved, the funds are disbursed, and your gold is returned after the loan is fully repaid.
What is the loan-to-value ratio for a gold loan?
The loan-to-value (LTV) ratio is the maximum percentage of your gold's eligible value that a lender can offer as a loan. In India, the applicable LTV depends on the loan amount and RBI guidelines. With Bajaj Finance, loans up to Rs. 2.5 lakh may have an LTV of up to 85%, loans above Rs. 2.5 lakh and up to Rs. 5 lakh have LTV up to 80%, and loans above Rs. 5 lakh up to Rs. 2 crore have LTV up to 75%, subject to applicable terms and regulations.
How does the gold loan approval process work?
To get a gold loan, apply for a gold loan online or visit your nearest Bajaj Finance Gold Loan branch with your gold jewellery and any one of the basic KYC documents. It will be checked for purity and weight. Based on its value, the loan amount is offered. After basic paperwork, the loan is approved, and funds are given often on the same day.
What are the benefits of a gold loan?
A gold loan gives you quick access to money using your gold jewellery. It needs minimal documents and offers fast approval, multiple repayment options, and low interest rates. You also keep ownership of your gold and can get it back after full repayment.
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Disclaimer
Bajaj Finance Limited (BFL) has the sole and absolute discretion, without assigning any reason to accept or reject any application as per BFL policy. *