Gold loan guide: how it works, what it costs and the RBI

Last updated 12 Nov 2026

A gold loan is a secured loan in which you pledge gold ornaments or coins to a lender and receive money against their value. The lender keeps the gold safe until you repay. Because the loan is secured, approval depends mainly on the gold rather than on your income papers, though lenders must still assess your repayment capacity (in detail for total loans above ₹2.5 lakh), and the process is usually quick compared with an unsecured loan. In return, you risk losing the gold if you do not repay. The Reserve Bank of India sets rules on how much a lender may lend against your gold, how long a certain type of loan can run, and how soon it must give your gold back.

This guide covers the process, the costs, the repayment styles, the RBI rules and a checklist. It does not quote interest rates, which differ by lender and change; see current levels on the interest rates page and the gold loan page.

How a gold loan works

You take your gold to the lender, with your KYC papers.
The lender tests the purity and weighs the gold, leaving out stones and other non-gold parts.
The lender values the gold on its pure gold content, using the reference price the Directions require (an average of recent closing prices for that purity).
The loan limit is a share of that value, called the loan-to-value ratio, or LTV.
You sign the loan agreement. The gold is sealed and stored in the lender's vault.
The money is paid to your bank account.
You repay as agreed, and the lender returns the gold when the loan is closed.

Who can take a gold loan

Most adults with KYC papers and gold of acceptable purity can apply. Lenders do not usually need salary slips, though some ask for a basic proof of income for larger amounts. The gold must be yours or be pledged with the owner's consent. Credit history may still matter to some lenders, but the gold carries most of the weight. See the gold loan page for what partner lenders ask.

The RBI rules in plain words

The Reserve Bank of India's Lending Against Gold and Silver Collateral Directions, 2025 set the rules for regulated lenders. The points below come from that notification, which we read on 8 November 2026. Rules can change, so check the current text.

RBI rules on gold loans, from the Directions

RBI rules on gold loans, from the Directions
Rule	What it says	What it means for you
Maximum LTV for consumption loans	85% up to ₹2.5 lakh; 80% above ₹2.5 lakh up to ₹5 lakh; 75% above ₹5 lakh, by total loan amount per borrower	Lenders cannot lend more than this share of the gold's value
LTV through the tenor	The LTV must be maintained throughout the loan	If gold prices fall, the lender may ask you to pay part or add security
Bullet loans	The tenor of consumption loans repaid in one payment is capped at 12 months	A bullet loan cannot run longer than a year, though it can be renewed after accrued interest is paid
Pledge limits	No more than 1 kg of gold ornaments and 50 g of gold coins pledged across all loans to a borrower	The limit counts all your gold loans together, so spreading the gold across lenders does not get round it
Return of gold	The lender must return the gold on the same day, and in any case within 7 working days of full repayment or settlement	Ask for the date in writing
Delay compensation	Where the delay is the lender's fault, compensation of ₹5,000 for each day beyond the timeline	You can claim it if the lender is late
Charges	All applicable charges must be in the loan agreement and the Key Fact Statement	Ask for both before you sign

The LTV tiers apply to consumption loans. Loans for business or agriculture can fall under other rules, so ask the lender which applies to you. For a full explanation of the tiers, read gold loan LTV.

What a gold loan costs

Charges are set by the lender and must appear in your agreement and Key Fact Statement. Common items are interest, a processing fee, a valuation or appraisal charge, charges for safekeeping in some cases, penal charges for late payment, and a charge for early closure where the lender applies one. Some lenders deduct fees upfront, so the money that reaches your account is less than the loan amount. Compare offers on the APR, which brings fees together with interest. See Key Fact Statement and APR.

Repayment styles

Common repayment styles

Common repayment styles
Style	How it works	Suits you if
Bullet	You pay interest and principal together at the end of a term of up to 12 months	You expect a lump sum soon
Interest each month, principal at the end	You pay only interest each month, then the principal	You want steady small payments and will repay the principal later
EMI	You pay equal instalments covering interest and principal	You want a loan that reduces month by month
Overdraw-style limit	You draw and repay within a limit secured on the gold	You need flexible access to cash

Styles on offer depend on the lender. Our guide on gold loan repayment options goes into more detail.

Worked example

You pledge gold valued at ₹4,00,000 on its pure-gold content. A lender applying the 80% tier to a loan of this size could lend up to ₹3,20,000. It may offer less. Suppose it deducts a processing fee of ₹3,000 and a valuation charge of ₹500 from the loan. The money that reaches your account is then ₹3,16,500, while you owe interest on ₹3,20,000. Always ask for the net amount and the APR.

Risks to understand

If you do not repay, the lender can recover its dues by selling the gold after giving notice. The details are in your agreement.
If gold prices fall and the LTV limit is breached, the lender may ask you to repay part or add security.
Lenders vary in how they store and insure gold. Ask about both.
A bullet loan that you cannot repay at maturity can be renewed only on the lender's terms. Read the renewal clause.
Fraud exists. Deal only with the lender's own branch or authorised channel, and never hand gold to an individual.

How to choose a lender

Compare the LTV offered, the valuation method, the APR, the fees deducted upfront, the repayment styles, and the lender's record on returning gold. See how to choose a gold loan lender. Use LOANZ 360 to compare your details with partner lenders' published criteria. You then choose where to apply; the lender decides, prices and pays out.

Checklist before you pledge

Ask for the valuation in writing, with weight, purity and the rate used.
Ask for the Key Fact Statement and the net amount you will receive.
Check the repayment style and the date by which you must repay.
Ask for early closure terms.
Ask how the gold is stored and insured.
Ask when and how the gold will be returned, and keep every receipt.

Frequently asked questions

Does a gold loan need a credit score?

The gold carries most of the weight, so approval depends less on your score than for an unsecured loan. Some lenders still check it, and the Directions require lenders to assess repayment capacity, in detail for loans above ₹2.5 lakh. A missed payment can affect your record.

How much can I borrow against my gold?

Up to the lender's LTV limit on the value of your gold. For consumption loans the RBI sets ceilings of 85%, 80% and 75% by loan amount, and lenders may offer less.

How long can a gold loan run?

It depends on the style. A bullet consumption loan is capped at 12 months. Other styles can run longer, as set by the lender.

What if I repay and the lender does not return my gold?

The lender must return it the same day or within seven working days of full repayment. If the delay is the lender's fault, compensation of ₹5,000 for each day beyond the timeline applies. Complain in writing first.

Is my gold safe with the lender?

Regulated lenders store pledged gold in secured vaults. Ask about storage and insurance, and keep all receipts and the packing list.

Can I get a gold loan for business?

Some lenders offer it. The consumption tiers may not apply, so ask the lender which rules do. See gold loan for business.

Can I close a gold loan early?

Usually yes. Some lenders charge for it. See our guide on gold loan foreclosure and ask for the charge in writing.

See Gold Loan Ask an advisor about it

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Gold loan guide: how it works, what it costs and the RBI rules