Are you thinking of taking a gold loan ever in your life? Like in your past you must have thought or in the coming near future you want to take a gold loan. Do you know the whole process for it? Do you know what should you do?
So today i will be talking about gold loans, the whole process I will be explaining to you. I will also let you know which banks are giving gold loan at what interest rate. So it will be easier for you to know just compare the banks, the interest rate and the processing fee also is very important in that case.
So, let’s learn everything.
Real-Life Example: My Friend’s 10 Lakh Gold Loan
Recently one of my friends has taken gold loan of 10 lakh rupees. So I have checked his documents and the reality of gold loan and what will be there in the documents when you take a gold loan from the bank’s end.
We will discuss practically everything about gold loans.
Step-by-Step Gold Loan Process: Starting with Pledging Your Gold
So basically the process starts when we take our gold to the bank and we pledge it. Like we give the gold to the bank and they will give us the money.
What happens in this process is you visit a bank branch like whatever bank you are thinking of. I would suggest you to go to a government bank instead of any private bank or NBFC is now in that case is there.
So whenever you visit a bank branch you basically go to the manager, you give your gold to them and you ask for the money against your gold which we call as gold loan.
Basically there are three tests that happen after you submit that gold to the bank.
- Gold Purity Checks: The Three Essential Tests
When the bank manager receives your gold, they don’t have any idea about the gold purity and everything. So there are people who can make fool out of the bank people that this gold is real or maybe in the terms of the weight or in the terms of the carats and everything.
To actually check the credibility of the customer who is coming to the bank to you know just give their gold and ask for the money. So bank called an evaluator or maybe we can call in simple language it is he is a goldsmith basically.
He checks the purity of the gold so first check comes under a stone test.
Basically the goldsmith or the evaluator we can call it. So he checks the gold on a stone, he rubs that gold on the stone and he can check that whether the gold is pure or not.
Then the acid test and then the file test come.
Acid test is basically when that gold is rubbed on that particular stone when acid is you know dropped on that stone, on the gold that acid is dropped on the gold and we can know whether the gold is of a 22 carat gold or 18 or 14 whatever. So that is done in that test.
After checking all those things, your gold is basically packed inside a box or any you know package kind of thing and it is sealed and then the gold is taken to the bank vault.
Generally a vault is a kind of locker. We can say for the bank where the bank people keep all the money or the entire gold thing. There are different vaults for everything.
They keep the gold in the gold vault or whatever they called it but a locker kind of thing to get it secured and you know all the sealed gold is kept there. So whenever you return the money and your entire loan to the bank, the bank will return your gold to you.
How Much Gold Loan Can You Get? Understanding LTV Ratio
Now the question is that how much amount can you take as gold loan against your gold?
Basically it is decided by the RBI like the new rule says that only 75% LTV that is loan to the value is to be given to the customer by the bank, not more than that.
But there are several banks who offer 69% or 70% or 71% but not more than 75% can be given as a LTV or as a gold loan against your gold.
Now, for example, if the value of your gold is 1 lakh, so you will get only 75,000 against your gold.
But we all know that gold loans are the most profitable business for the banks. But these RBI changes have challenged all these businesses now because only you can give like 75% of the amount can be given.
Now, if the bank is offering fewer amounts, they’ll get less interest on that. But previously, it used to happen that they give the exact amount or certain like little higher percentage on your gold loan. And they, of course, in return, they’ll get the higher interest.
So now the businesses of the banks are also, they are facing a downfall for that. But RBI is the RBI; he is the god for the finance industry. So everything happens according to the rules and regulations.
The new rule says only 75% LTV can be given against the gold loan.
Choosing the Right Bank for Your Gold Loan: Interest Rates Comparison
Another important thing that comes to the mind of the people is that from which bank they should offer.
You can see a table. This is a list of the banks which are offering what percentage of interest you have to pay against your gold loan.
You can see on the top, it is Indian Bank, then PNB, then Canada, then Bank of India, then Union Bank of India, Central Bank of India, then Yuko Bank, State Bank of India, Bank of Baroda.
So basically, Total State Bank of India, they all are like government banks which are offering less interest on the gold.
After that, you can see private banks and then like NBFCs, which offer the highest interest on the gold loan.
I would suggest you that you can choose for government banks whenever you want to have a gold loan.
So because of the interest rate, of course, and the processing fee as well, there are certain banks which offer like more than 1% or more than like 0.5% as a processing fee.
But the government banks, of course, in comparison to the private banks and the NBFCs, they offer less interest.
- LTV Variations: Farmers vs. Salaried/Business Owners
Now, like I told you that there are certain banks which offer 70% or 69%. But how do they bifurcate all these percentages depending on the person?
It is basically divided into two categories. One is for farmers, the people who have farmlands. And one, like whom salaried or businessmen likes us.
So banks usually offer 75% LTV to the farmers and 69%, 70%, 72% percentage of this LTV to the salaried or the businessman.
Gold Loan Documents and Valuation: What to Expect
Now, the process starts as you visit the bank branch, the goldsmith or the appraiser or the evaluator, we called it in the bank terms.
So he comes, he checks the purity of the gold, your gold is then sealed and kept in the bank vault.
That person who has come as an evaluator, he works for the bank. He charges certain fee for checking that thing that may be up to 500, 2000 rupees.
So if the amount of the gold is like higher, so they’ll charge higher amount. If the cost of the gold or the value of the gold is less, they’ll charge a lesser amount comparatively.
So now here on the top, you can see the document that is given by the bank. Like what you have pledged to the bank to get a gold loan.
They have mentioned everything about the gold. What is the value of the gold? What are the units that you have pledged? What is the current value like current price that is going on in the market for that particular gold? And what is the final amount that comes out to be? And what is the final amount that you will get against your gold?
Everything that you brought to the branch is listed in a document kind of thing. So that there is no confusion from your end also and from the bank’s end also.
And you can also see there are different columns where a gross weight and a net weight are mentioned.
Gross Weight vs. Net Weight in Gold Loans
What is a gross weight and net weight in terms of gold?
For example, you give a necklace to pledge to the bank or there are certain little ornaments that are put there in the gold jewelry.
Those items or those stones or something, that doesn’t carry any value. Only the value of the gold is calculated and they will tell you that amount only according to that gold thing that you have given.
Now if the weight of the gold is like 7.7 grams that will be a gross weight including the weight of the stones that are there on the jewelry.
If you calculate the net weight, that net weight will be excluding the weight of the stones and the other ornaments that are there on the jewelry.
So the net weight will be like a full-fledged gold weight only.
At this time, you are allowed to take photos so that there will be no confusion from both the parties.
Then the sheet with all the details like types of ornaments, their gross and net weight, your loan amount etc. will be made and given to you.
Also, there will be a bank employee along with the appraiser or the evaluator with you. So you won’t be left alone with the appraiser and a bank employee will be there during the process.
Alternative to Gold Loans: Credit.pay Yes Bank Ace Credit Card for Quick Funds
Before moving forward, we all know that if we need quick funds, we can get loan from the bank. We just need to pledge something and we’ll get money in return for that.
But let’s be real, not everyone is comfortable in pledging their gold and getting the money out of that, especially for smaller expenses or short-term needs.
There is where a smart digital thing comes in. Credit card. and we should talk about Credit. pay’s lifetime free credit card.
It is Credit.pay Yes Bank Ace credit card which gives you a lifetime free credit card, works everywhere plus UPI and online and offline transaction you can do with this card.
Along with that, Credit.pay’s cashback can be used to avail discounts on popular brand vouchers and to pay bills by Credit.pay app.
Flat 2% cashback on UPI and you can save Rs 2 for every Rs 100 spent. And these are the Credit.pay rewards stored. You can check what Yes Bank reward points give you.
And along with that, there are other benefits also for Credit.pay Yes Bank Ace card.
For getting this card, the eligibility is that you should be between the ages of 21 to 60 years. Your salary should be more than INR 25,000 per month. You should have a civil score of 720+.
If you are self-employed, your ITR should be more than INR 7.5 lakhs per annum and you should not be holding any other Yes Bank credit card.
So it is clear now. Go loan for a higher or a larger amount of money and Credit.pay’s Yes Bank Ace credit card for smaller and quick transactions.
Types of Gold Loans: Term Loan, Overdraft, and Monthly Interest
There are basically three processes from which you can take gold loan. First one is a term loan. Second is overdraft and third is monthly interest.
1. What is a Term Gold Loan?
In this case, you have taken a loan for six months. And now let’s take another example that you are taking a loan of INR 10, 41,000.
You are getting that amount against your loan and you have to pay some interest also. So you must be paying some 8-10% if you are taking from a government bank.
There are banks like private banks or NBFC who charge actually more than 15%. But instead of going there you should go for some government banks.
So even if you are, have to pay like 10%, so over that amount only you need to pay the interest. And then comes to the processing fee, which could be around 0.3% to 0.5%.
And then you have to pay some amount to the valuator.
The term loan comes in such a way that if you have taken any particular amount of money for the gold loan for a particular time frame, like 10 lakhs for six months, you need to pay the principal amount plus the interest amount after six months, like after completing your full term of the loan.
This is generally you don’t have to pay interest or the installments every month against your loan.
You get a loan of 10 lakh rupees; the amount will be credited to your savings account.
One more thing is to remember that it is not necessary that you will take gold loan from that similar bank where you have a savings account. It is not necessary for that.
You can take gold loan from any bank even if you don’t have a savings account in that bank. Only your Aadhaar card and your PAN card are required.
In case of term loan, what used to happen earlier was that if you had to extend the term of your loan, then you would not have to pay the principal just as yet. All you have to do was just pay the interest and your loan will be renewed.
But now the new RBI guidelines say something else. RBI says that once the term of six months is over, you will not just have to pay the interest, but also the whole principal amount, which we have taken the example of the case of 10 lakh rupees.
You have to pay the 10 lakh also plus the interest also and after that only, you will get your loan renewed.
2. What is an Overdraft Gold Loan?
Now comes the next type, which is an overdraft.
For example, in the similar case, you have taken a term loan. Now you take that loan in term of overdraft.
So the same gold loan of 10 lakh rupees, now this time it is an overdraft for six months.
Now, in any case or in any emergency, you want to take out some amount from your savings account. And this is the same account where your loan amount has come.
Now, suppose, after one month, you got 9 lakh rupees from somewhere. So now you can deposit that 9 lakh rupee against your 10 lakh rupee that you have taken.
In the same account, you have deposited those 9 lakh rupees. Now the interest will be calculated on that remaining 1 lakh only. You don’t have to pay interest on 10 lakhs.
You can also use that money like the credit and debit thing can happen from the same amount also and the same account as well, of course.
Now, this overdraft facility is basically helpful for small businessmen or people who work in a sector where they can get a large amount of money at one time and they can deposit the amount against their loan that they have taken.
And the interest will be then calculated on the remaining amount only.
3. What is a Monthly Interest Gold Loan?
Now last one is the monthly interest goal loan. In this, you have to keep repaying the interest amount every month on the goal loan.
If you have taken the loan for 6 months, so you have to pay interest every month.
This basically comes in a better way than term loan because you don’t have to feel the burden of paying the whole interest after 6 months. You can pay the interest every month so that it can give you a relief also that I don’t have to pay a larger amount of money in one single go.
Gold Loan Charges: Processing Fees, Foreclosure, and More
As I have told you, there are multiple banks who offer different interest against the gold loan.
Also, they charge some processing fee which could be around 0.2% to 1%. And also there are foreclosure charges as well.
Now foreclosure means that if you want to close your loan before the time of the closure, like so if you have taken your loan for 6 months, now you want to close it before 6 months, like 2 months you need to close it.
So there will be some foreclosure charges that depend from bank to bank. It could be 1% also.
Few banks say that if you want to pay the whole amount before the time is done, so you need to pay 1% extra, like 1% penalty will be there.
New RBI Guidelines for Gold Loans (Effective April 1, 2026)
Now, you can see new guidelines that have come from RBI which will be effective from 1st April 2026.
- The LTV cannot exceed 75%.
- Proof of ownership of gold should be given or self-declared.
- And also the max goal loan against gold coin if you want, so you can have it for 50g and for gold jewelry it can be 1kg.
- And the last one is you have to pay the principal amount plus the interest, and then only you can get your gold loan renewed.
So this was the whole process for goal loan, all the 3 types of goal loan that you can have.
If you have any doubt related to gold loan, please let me know in the comment section.
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Author
I’m Ashish Pandey, a content writer at GoodLoanOffers.com. I create easy-to-understand articles on loans, business, and general topics. Everything I share is for educational purpose only.