Avoid common mistakes for Gold Loan

Gold Loan

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India, where Gold is not only kept in the form of jewellery, rather considered as an asset, is ranked as the third-highest importer of Gold in the world. From movies and eye-catching advertisements to a bank loan, Gold is found everywhere in the country. Indians have a tradition of buying Gold in various forms, such as jewellery, coins, bars, etc.also buy Gold as an investment for the future. The main reason why it is kept as an investment is, Gold can be made use of money when someone needs urgent cash, as in a medical emergency, home renovations, to pay a debt and many more like these. Also, these days gold loan apply online has become very easy.

Applying for a Gold Loan is as easy as a Personal Loan. The borrower or the recipient, who is taking the loan, has to submit some important documents like PAN, a photograph, address proof, and identity proof and once the documents are verified and the evaluation of Gold is completed, the loan is disbursed in a working day. As it is a type of Secured Loan, thus the rate of interest is low and there are fewer risks. These are all the reasons why a Gold loan is one of the best options and why the Gold Loan market is becoming more popular day by day.

But, there are some common mistakes people make while applying for a Gold Loan. Some of them are:

Choosing High-Interest rate scheme to get high LTV: LTV or Loan to Value Ratio is a measurement, which is used by the lenders to express the balance of a loan to the value of an asset. In India, in the case of  Gold Loan, a maximum of 75% ratio is allowed. Higher the LTV, the higher the risk involved. To avoid the burden of interest rate always choose a scheme that comes with high LTV but low-interest rates.

Not knowing the Hidden Charges: Companies, which are listed as Gold Loan providers in the market often hide a lot of charges by stating them ‘Terms and Conditions.’ The borrower should know that there are some common charges, which include Gold evaluation charge, loan processing fee, penal charges on late payment, foreclosure charges, etc, but hidden charges may come as a surprise. Be aware of the charges and choose a transparent scheme, which offers no hidden charges.

Not checking creditor’s credibility: Nowadays, there are many NBFCs (Non-Banking Financial Companies), well-established private lenders, and banks are available in the market, which provides a Gold Loan. The loan is secured and protected by collateral, which remains with the creditor. If the borrower cannot repay the loan, the collateral is used to regain the amount. But there is a chance of the creditor turns out to be a fraud. So, while applying for the loan, always research and check the credibility of the organization.

Being Unaware of the Quality of Gold that Qualifies for the Loan: Before applying for a loan, the borrower should know the purity, quality, and weight of the Gold so that she/ he can verify the ornaments that will further affect the loan amount. The purity of gold is measured by how much carrots the gold is. Generally, gold ornaments of 22 carrots are considered to be good. The gold jewels can be in any shape, size, or form. For example, if you pledge your necklace, only the value of gold will be taken into consideration. In gold coins, the amount of coins above 50 grams is to be considered.


Apart from the above-mentioned mistakes, there are many, some of which are related to auction where some come with the after-sales service. It is always recommended to the customers that they must not get influenced by the marketing gimmicks and always ask questions to the lenders to churn out each and every important information related to the gold loan.


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