Gold loan interest rates from 8.75%: Compare lenders, terms, and repayment options

Gold loans have emerged as one of the most accessible and popular forms of short-term credit in India, especially during emergencies or when urgent liquidity is needed. These loans are secured by pledging gold jewellery or ornaments with a bank or a non-banking financial company (NBFC). Since gold is offered as collateral, lenders face lower risk, making the process quick, convenient, and less dependent on the borrower's credit history.

How gold loans work

Gold loans experienced the most rapid expansion among personal loan offerings, with outstanding loans surging by 87% year-on-year to Rs 1.91 lakh crore by February 2025. This growth far exceeded the 11% increase in credit card debts during the same period.

To avail a gold loan, you simply need to deposit your gold items—typically 18 to 24 carat jewellery—with a lender. The lender evaluates the purity and weight of the gold, and based on the current market price, determines the loan-to-value (LTV) ratio, which typically ranges up to 75% of the gold’s value. Once approved, the loan amount is disbursed almost instantly, often within a few hours.

Borrowers then repay the loan through EMIs or bullet payments (lump sum at the end of tenure), after which the gold is returned. If the borrower defaults, the lender has the right to auction the gold to recover the dues.

RBI on gold loans

The Reserve Bank of India (RBI) released a draft regulatory framework on April 9 with the aim of enhancing the safety and transparency of gold-backed loans for borrowers. This proposed framework is applicable to various types of lenders, including banks, NBFCs, co-operative banks, and regional rural banks (RRBs), and seeks to standardize and improve the gold loan processes to better serve customers.

As part of the monetary policy statement on April 9, two key frameworks were proposed concerning co-lending and lending against gold ornaments and jewelry. These are popular loan segments for both lenders and borrowers. Under this proposed framework, lenders are prohibited from providing advances against primary gold/silver (such as 24-carat gold bars) or financial assets backed by gold- or silver-linked ETFs or mutual funds. Borrowers are also not permitted to take out simultaneous gold loans for both consumption and income-generating purposes.

Lenders are prohibited from extending loans if the ownership of the collateral is uncertain, and must maintain documentation confirming ownership. Loans secured by re-pledged gold are strictly forbidden. Additionally, bullet repayment loans for consumption purposes are limited to a maximum tenure of 12 months.

The draft sets forth comprehensive standards for all gold lenders, which encompass incorporating gold loan policies into their credit and risk frameworks, implementing single-borrower and sectoral exposure limits, and conducting thorough credit appraisal and due diligence to assess repayment capacity. Furthermore, lenders are required to establish mechanisms to monitor the utilization of loan proceeds and keep detailed records.

Existing interest rates and fees

Interest rates on gold loans typically start from 8.75% per annum, but this can vary widely based on the lender, loan amount, tenure, and market gold prices. Some examples:

Manappuram Finance: Rates start at 9.9%, with a minimum loan of ₹3,000.

HDFC Bank: Offers loans from ₹25,000 onwards, with interest starting at 9.3%.

Axis Bank: Interest rates start at 17% for loans above ₹25,000.

Additionally, most lenders charge a processing fee of up to 2% of the loan amount.

Factors that affect interest rates

Gold prices directly influence loan terms. When gold prices are high, lenders may offer better terms or lower interest rates, as the collateral value increases. Conversely, falling gold prices could make lenders more conservative in their loan offers.