Be careful before taking gold loan, otherwise loss may occur

Updated: 23-02-2026, 08.29 PM

What is the news?

Many times, when people need money, they choose the option of gold loan, which is quite easy to get. The bank or finance company gives you the money after just a few hours of paperwork. This loan is easy, but equal caution should be taken before taking it. Ignoring it can lead to loss instead of profit. Let us know what things you need to keep in mind before taking a gold loan.

gold loan

How does gold loan work?

When you take your jewelery to the bank, the bank checks their purity and weight. After this, the gold loan amount is decided based on the current price of gold. According to the Reserve Bank of India (RBI), a maximum of 75 percent of the value of gold can be availed as gold loan. This is called the ‘loan-to-value’ (LTV) ratio. The tenure of this loan is between 3-12 months. This affects the interest rate.

There are 2 options to repay the loan

Interest rates on gold loans usually range between 8 to 15 percent. There are 2 ways to repay it. There is an EMI option, in which you repay both the principal and interest every month. The second is the bullet payment option, in which you pay only the interest every month and repay the entire principal amount at once at the end of the gold loan tenure. This option seems easy, but in the end it is difficult to arrange a large amount.

Keep these things in mind

Danger of auction: This is a secured loan. This means that if you do not repay the money on time, the bank has the legal right to auction your jewellery.
Price fluctuations: If the price of gold suddenly falls, the bank may ask you to deposit additional gold or repay some of the loan amount immediately.
Hidden Charge: Apart from the interest rate, get information about processing fees, gold valuation charges and late payment penalty.