What Is a Gold Loan?
A gold loan is a secured loan where you pledge gold jewellery, coins or bars as collateral and receive a percentage of its value as a loan. Gold loans are among the fastest-disbursed loans in India — many lenders disburse within 30 minutes after gold valuation.
The Reserve Bank of India caps the maximum loan-to-value (LTV) at 75% of the gold's value. Lenders typically offer 60-75% LTV depending on tenure, gold purity (22K is standard) and the lender's risk appetite.
Gold Loan Interest Rates — Top Lenders Compared
The table below shows starting interest rates from major lenders. Actual rates depend on loan amount, tenure, customer profile and current RBI policy. Rates are indicative as of early 2026 and change frequently — always check with the lender.
| Lender | Starting Rate | Max LTV | Processing Fee | Tenure |
|---|---|---|---|---|
| SBI | 8.95% | 75% | 0.5% (max Rs 500) | Up to 36 months |
| Bank of Baroda | 9.15% | 75% | Rs 250-500 | Up to 36 months |
| Canara Bank | 9.00% | 75% | 0.5% | Up to 36 months |
| Punjab National Bank | 9.25% | 75% | 0.30% | Up to 36 months |
| HDFC Bank | 9.50% | 75% | 1% + GST | Up to 24 months |
| ICICI Bank | 9.25% | 75% | 1% + GST | Up to 12 months |
| Kotak Mahindra Bank | 9.00% | 75% | Up to 2% | Up to 48 months |
| Axis Bank | 9.50% | 75% | 0.5-1% | Up to 36 months |
| Muthoot Finance | 9.00% | 75% | Up to 1% | Up to 36 months |
| Manappuram Finance | 9.90% | 75% | Up to 1% | Up to 12 months |
| IIFL Finance | 9.24% | 75% | Up to 2% | Up to 24 months |
| Federal Bank | 8.95% | 75% | Rs 500 + GST | Up to 24 months |
Note: "Starting rate" is the best advertised rate. Many customers receive rates 1-3% higher based on amount, tenure, scheme and credit profile.
Bank vs NBFC for Gold Loans
Public Sector Banks (SBI, Bank of Baroda, Canara, PNB):
- Lowest interest rates (8.95-9.25%).
- Strict documentation and slower processing (1-3 hours).
- Lower processing fees (Rs 250-500 flat).
- Conservative gold valuation.
Private Sector Banks (HDFC, ICICI, Kotak, Axis):
- Mid-range rates (9.00-9.50%).
- Faster processing (30-60 minutes).
- Higher processing fees (1-2% of loan amount).
- Better customer service and online tracking.
NBFCs (Muthoot Finance, Manappuram, IIFL):
- Highest rates (9.00-22% depending on scheme).
- Fastest processing (15-30 minutes).
- More flexible eligibility (no income proof for small loans).
- Wider branch network in tier-2 and tier-3 cities.
- More scheme variety (different rates for different tenures).
For a low-cost long-term loan with no urgency, SBI, Bank of Baroda or Federal Bank typically win. For instant cash with minimal documentation, Muthoot or Manappuram are unmatched.
Hidden Costs Beyond Interest Rate
The headline interest rate is only one part of the cost. Watch for:
- Processing fee — 0.5-2% of loan amount. Often non-refundable.
- Valuation charge — Rs 200-500 to inspect gold (some lenders waive).
- Documentation charge — Rs 200-1,000 flat.
- Stamp duty — State-specific, Rs 100-500.
- Foreclosure/Prepayment fee — 0-2% of outstanding for early closure.
- Late payment penalty — 2-3% per month on overdue amount.
- Auction charge — If you default, lender auctions gold and may charge auction fees.
Effective cost (APR): Always ask for the APR (annual percentage rate) including all fees, not just the headline interest rate.
Gold Loan Schemes Explained
Many NBFCs offer multiple "schemes" with different interest rates. These usually trade off interest rate against LTV or tenure:
- High-LTV scheme — 75% LTV but higher rate (12-15%).
- Low-rate scheme — 9-10% rate but lower LTV (60-65%).
- Short-tenure scheme — 9-10% rate for 3-6 month tenure.
- Bullet repayment — Pay full interest + principal at end of tenure. Saves on EMI hassle but higher total interest.
- EMI scheme — Equal monthly payments. Slightly lower total cost than bullet.
Always do the math on total cost over your expected tenure before picking a scheme.
Eligibility and Documents
Gold loan eligibility is among the most relaxed in Indian lending:
- Age: 18-75 years (some lenders 21-65).
- Income proof: Usually not required (loan is secured by gold).
- Credit score: Not a hard requirement, though it helps for higher loan amounts.
- Gold purity: 18K-22K accepted; 24K coins also accepted by most lenders.
- Documents: PAN card, Aadhaar card (or alternate ID), 2 photos. Sometimes address proof.
Online Gold Loans
Several lenders now offer doorstep gold loans where an agent visits your home for gold valuation. Major players: Rupeek, Muthoot Online, IIFL Doorstep Gold Loan, Manappuram Doorstep.
Pros:
- Convenient — no branch visit.
- Real-time valuation by trained appraisers.
- Quick disbursal via NEFT/IMPS.
Cons:
- Rates are typically 0.5-1% higher than branch-walk-in rates.
- Limited availability outside metros.
- Some platforms have had service-quality complaints.
For most borrowers, walking into a branch is cheaper. Use doorstep services only when convenience justifies the rate premium.
Tips to Get the Lowest Rate
- Compare 3-4 lenders. Branch managers can often negotiate within a band, especially for repeat customers and amounts above Rs 5 lakh.
- Prefer 22K gold. Lower-purity (18K) jewellery fetches lower LTV and sometimes higher rates.
- Choose shorter tenure if cashflow allows. Many NBFCs offer 8-10% for 3-6 month schemes vs 12-15% for 12+ months.
- Use existing bank relationship. Existing savings or salary account customers often get 0.25-0.50% rate concession.
- Watch for festival schemes. During Akshaya Tritiya, Dhanteras and end-of-fiscal periods, many lenders offer lower rates and waived processing fees.
What Happens If You Default
If you miss EMIs, the lender follows a standard process:
- Reminder calls for 7-15 days.
- Demand notice after 30 days.
- Pre-auction notice with right to repay full dues + penalty.
- Public auction after 60-90 days of default.
The auction sale price is used to cover loan + interest + penalties + auction costs. Surplus is refunded to you (rarely happens — gold is often auctioned at distress prices). If sale value is less than dues, the lender can sue for the shortfall — but most banks write off small amounts.
Key Takeaways
- Gold loan rates start at 8.95% (SBI) for top-rated customers; most loans price at 10-15%.
- RBI caps LTV at 75% of gold value.
- Public banks = lowest rates but slow; NBFCs = fastest disbursal but higher rates.
- Watch hidden costs — processing fees, valuation, foreclosure penalty can add 1-3% to effective cost.
- 22K jewellery fetches better LTV than 18K. 24K coins valued highest.
- Default leads to gold auction after 60-90 days; surplus refunded, shortfall pursued by lender.
See also: Gold loan vs personal loan comparison and Best time to buy gold in India.
Disclaimer: This article is published by ipomarket.in for educational and informational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security, or an offer to invest. Past performance is not indicative of future results. Tax rules and interest rates change frequently — verify current figures with official sources or a SEBI-registered financial advisor before acting. ipomarket.in is not a SEBI-registered investment advisor or research analyst.