A gold loan is the fastest formal credit in India: pledge ornaments, get funds the same day, no credit score required. Because the metal secures everything, even applicants with poor or no credit history qualify. But two numbers decide your experience — the LTV cap and the purity assessment.
How much you can borrow: the LTV caps
Regulators cap lending against gold's market value on a slab basis — smaller loans get more generous caps:
| Loan amount | Maximum LTV |
|---|---|
| Up to ₹2.5 lakh | 85% |
| ₹2.5–5 lakh | 80% |
| Above ₹5 lakh | 75% |
So gold worth ₹2 lakh can support up to about ₹1.7 lakh. The value is computed from the day's reference gold price for your ornaments' pure gold content — which is where purity matters.
Purity: why your 22K bangle isn't priced like 24K
Ornaments are rarely 24K. A 22K piece is ~91.6% gold; 18K is 75%. Lenders weigh your items, deduct stones and non-gold parts, then value only the gold content. Two identical-looking bangles can differ 20% in loan value purely on karatage. Hallmarked jewellery speeds assessment and reduces disputes.
Bank or gold-loan NBFC?
- Banks generally charge lower interest but are slower, with more paperwork and conservative valuation.
- Specialist NBFCs (Muthoot, Manappuram, IIFL) are faster, open longer hours, offer more schemes (bullet repayment, interest-only), and often value slightly better — at somewhat higher rates.
The auction risk — read this before pledging
If you default, the lender can auction your gold after due notice. Families lose heirloom jewellery this way every day, usually because they treated a bullet-repayment scheme casually: no EMIs feel painless until the lump sum plus accumulated interest lands at maturity. Rules to pledge safely: borrow well below your maximum; pay interest monthly even when not required; set a repayment date before the tenure ends; and keep the pledge receipt with photos of your items. If gold prices fall sharply, lenders can also demand partial repayment to restore LTV — leave headroom for that.
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Frequently asked questions
How much loan can I get for 10 grams of gold?
Roughly: 10g × the day's price per gram of your purity (22K is about 91.6% of the 24K rate) × the LTV cap (85% for loans up to ₹2.5 lakh). The lender's live valuation on assessment day gives the exact figure.
Do I need a credit score for a gold loan?
No — the gold fully secures the loan, so most lenders don't require any credit history. This makes gold loans the most accessible formal credit for new or low-score borrowers.
What happens if I don't repay my gold loan?
After reminders and a formal notice, the lender can auction your ornaments to recover dues; any surplus after recovery is returned to you. Interest and penalties accrue until then. Contact the lender early to extend or restructure instead of defaulting.
Which is better for gold loans — banks or NBFCs like Muthoot?
Banks usually price lower; specialist NBFCs are faster, more flexible on schemes and often more generous on valuation. For short, small loans the convenience premium can be worth it; for large or long loans, compare bank rates first.
Solvifin is a loan-comparison and referral platform, not a lender. This guide is general information, not financial advice — final rates, eligibility and approval are always decided by the lender. RBI rules summarised here are simplified; refer to rbi.org.in for the authoritative text.