5 Things to Consider Before Getting a Gold Loan

5 Things to Consider Before Getting a Gold Loan


Maximum Indian households preserve their gold items and jewellery safely in lockers. Apart from carrying a sentimental value, gold can be mortgaged to avail a gold loan. In other words, you can utilise this precious metal for getting substantial funds to meet financial crises, medical emergencies, business enlargement, child’s education, and so on. 

There are plenty of lending institutions that offer this credit option, out of which the Muthoot Finance gold loan is important. Keep reading to know some important things that you should remember while availing this loan. 

5 Key Things to Keep in Mind While Availing a Gold Loan

Following are the top five pointers that you should remember while applying for a gold loan:

  • Valuation of Gold 

Remember that the amount of credit entirely depends on the value of gold. This signifies that the higher purity of gold, the higher will be the amount of loan. Thus, to become eligible for a gold loan, the purity of a gold item pledged should range between 18 carats and 24 carats. 

Now, if you are pledging gold jewellery fitted with precious stones, or any other metal, these elements are deducted before evaluating the actual amount of gold it contains. Accordingly, the credit amount offered to you is determined only against the actual gold in an asset.

  • Ensuring the Trustworthiness of the Lender 

Since you have to collateralise your precious gold items, make sure that the lender is trustworthy. Avoid availing loans from small jewellery shops since they are not managed properly and do not follow any government rules and regulations. Often such jewellery shops are found involved in fraudulent activities, which could make it risky to get back your ornament in due course of time. 

So it makes sense to opt for a gold loan from a specialised lending institution. For instance, the Bank of Baroda gold loan is a popular scheme from one of the most trusted Indian financial institutions. So you can rest assured while availing gold loans from them.

  • Choosing Financial Institutions 

In case of a reliable lender, there are generally two options from where you can avail the gold loan. You can avail this credit option loan either from a bank or a non-banking financial company (NBFC). 

While evaluating gold, NBFCs can be a better choice since they follow an easy procedure and are considered more reliable than banks. For instance, the Muthoot Finance gold loan is offered at reasonable interest rates and it also ensures easy documentation and processing. 

  • Choosing Repayment Options and Schedule

Another crucial factor to look for while availing a gold loan is the repayment option. Lending institutions offer an extensive range of options for repayment, together with equated monthly instalments (EMI). In addition, you can pay the interest during the tenure of the loan and clear the principal amount effortlessly.

When it comes to the repayment schedule, gold loans usually come with a short-term repayment tenure that ranges from a week to several years. While availing a gold loan, select a repayment option that seems reasonable. Also, consider the general expenses alongside other cash flows while choosing the tenure.

  • Comparing Interest Rates

Lending institutions determine the rate of interest on gold loans as per your risk profile. The interest rates range between 8% and 25% in accordance with your risk assessment. Furthermore, there are several factors such as credit amount, tenure of repayment, LTV, etc. that are involved in deciding the rate of interest. In order to avail the best loan offer, you need to compare interest rates provided by several lending institutions. In addition, check other charges as well like processing fees and foreclosure charges. 

Eligibility Criteria for Gold Loan

Applicants availing gold loan need to meet certain eligibility parameters as stated:

  • Borrowers should be an Indian citizen
  • Age of the applicant should range between 21 years and 70 years
  • Applicant needs to be salaried, self-employed, trader, or farmer 

After you meet the eligibility criteria, take a look at the important documents that you need to gather and submit while availing a gold loan.

Documents Required for Gold Loan

Mentioned below are the necessary documents required while applying for a gold loan:

  • ID Proof (comprise PAN card, Aadhaar card, driving licence, passport)
  • Address Proof (include Aadhaar card, passport, driving licence)

How to Apply for Gold Loan?

Mentioned below is the easy step-by-step process to apply for a gold loan:

Step 1: Navigate to the official website of a lending institution

Step 2: From the ‘Loans’ section, click on ‘Gold Loan’

Step 3: Fill out the application form with necessary details like name, phone number, and date of birth.

Step 4: Select the state, city, as well as nearest branch of the financial institution 

Step 5: Upload the necessary documents accordingly and click on ‘Proceed’

Step 6: Cross every detail you have filled out on the application form and click on ‘Submit’

Upon completing all these steps, your application for a gold loan will be submitted successfully. After this, a loan representative will contact you for further processing of the application.

Having a crystal-clear idea about gold loans may help you apply for this credit facility without hassle. However, keep in mind that the terms and conditions of this loan vary from one lender to another. Now, if you are willing to avail the Muthoot Finance gold loan, make sure that you go through their website and conduct thorough research before taking any decision.

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