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Is Gold Loan a Safe Option Or Not?

Gold Loan
Is Gold Loan a Safe Option Or Not

The convenience of availing of credit against valuable liquid assets like gold suits both the lender and the borrower. Where lenders in the organised market find it to be a smooth business model with growth potential, borrowers find it the best way to get funds quickly with the least possible documentation.

Pledging gold is a common practice to overcome the temporary financial crunch. Gold loans are safe in the organised gold loan market. The market is currently valued at Rs 4,149 billion. The market is expected to grow at a 3-year compounded annual growth rate (CAGR) of 19.5% – estimated at Rs. 7,557 billion by FY2024. 

A gold loan is an instant financing option predominantly of small ticket sizes and can go up to Rs.50 lakhs to meet any sudden or planned financial commitments. Easy accessibility of such loans is the primary reason behind such increasing demand for gold loans. Gold loans can be availed of quickly with minimum paperwork. The lender doesn’t check credit scores or evaluate the borrower’s repayment capacity to sanction a loan against gold. NBFCs expand their service network digitally to meet the increasing demand for gold loans.

To assure the safety of gold loans, consider the following aspects:

  • Ensure the lender’s credibility: It is always recommended to do a background check on the lender and choose a reputed lender that assures the safety of the borrower’s gold until the loan tenure. 
  • Know the safety protocols of the lender: Gold loans are managed by professional institutions that use a strong vault to keep the pledged gold and are monitored under CCTV cameras 24×7. Once the loan amount is disbursed and the lender takes possession of the gold, it is the lender’s responsibility to ensure the safety of the gold. The Reserve bank of India (RBI) has defined a minimum level of physical infrastructure and facilities for the lenders to engage in financing against gold. It includes a safe deposit vault and appropriate security measures to operate the vault for the safety of the gold. Thus, the gold is safe in vaults inside a strong room built as per the standards and specifications set by the RBI. Some lenders insure the pledged gold. Look at what standards have been adopted to protect the pledged gold with it.
  • Understand the lender’s repayment strategy: Gold loans come with various repayment options. Gold loans are flexible in terms of repayment tenure. Borrowers can pay the loan interest in monthly installments and the principal amount as a lump sum at maturity. Borrowers can opt for the conventional monthly instalments to pay the interest and principal amount together or opt for the interest payment only during the loan tenure. Borrowers must consider their financial stability while opting for repayment tenure.
  • Know about the conditions to seize the gold: If a borrower cannot repay the gold loan within the specified loan tenure, the lending institution has the right to seize and auction the gold to recover the remaining loan amount. If it recovers more than the outstanding loan amount, it will be returned to the borrower. However, the lender sends many warnings before auctioning it and also provides a grace period to repay the loan. Still, if a borrower cannot repay the loan, the pledged gold of the browser will be auctioned. The making charges and additional tax rates are not included in such auction deals. Also, the borrower will be charged with penalties. Such defaults or delay in EMI payments significantly affects the borrower’s credit score.

Why Prefer a Gold Loan Calculator

The Gold Loan interest can be used to determine the interest rates on your loan against gold. The applicants can calculate the offered rate of interest and loan tenure without being involved in manual calculations.

Gold loan calculators are ready to use, and free tools are available 24×7 at the lender’s official website. These calculators can help borrowers:

  • to plan their finances before applying for a gold loan.
  • to understand which gold loan scheme suits them best
  • to estimate gold loan per gram
  • to take a loan with comfortable loan tenure during which they can make timely EMI payments.


Thus, you can make a wise decision by considering these aspects and safely availing the maximum gold loan amount at an affordable interest rate against your pledged gold. Use a gold loan calculator to know gold loan per gram – how much loan your gold can fetch.

For the best gold loan, step into your nearest Muthoot Gold Point branch today!

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