Key Concepts to Know About Gold Loan Rates

The gold loan interest rate applicable to you is dependent on a multitude of factors. Get to know them thoroughly before you proceed to avail a gold loan

Gold is one of the best inflation-beating investment options with very low investment risk. This is primarily why most Indians prefer to invest in gold either in the form of jewellery or bullion. One of the many advantages of gold is that it can be very helpful during a financial crunch. Since it is very liquid in nature, you can quickly sell it off to gain access to some much-needed funds. 

However, what if you don’t wish to sell your hard-earned gold, but still need access to funds? Here’s where a gold loan comes into the picture. By availing a loan against your gold jewellery or bullion, you can gain funds quickly without having to sell it. Also, once you repay the entire loan, the pledged gold is returned to you as well. 

Now, if you’re planning on availing a gold loan anytime soon, it is important for you to keep certain key concepts in mind regarding gold loan interest rates. Wondering what they are? Here’s a quick overview. 

  • Gold Loan Interest Rates Vary Depending on the Loan Amount and Tenure

The amount of loan that you avail and the tenure that you choose for a gold loan are two factors that can influence the interest rates applicable to you. Generally, the greater the gold loan amount, the higher the interest rates are likely to be. 

Similarly, the higher the loan tenure that you opt for, the higher the interest rates will be. This is simply due to the fact that the lender would have to take on risk for a far longer period of time. Therefore, to offset this risk, they typically charge a higher rate of interest. 

  • Repayment Capacity Dictates the Gold Loan Interest Rate 

Your repayment capacity is primarily dictated by your monthly income. Lenders typically tend to reward individuals with higher repayment capacities by offering gold loans at highly attractive interest rates. This is due to the fact that individuals with higher monthly incomes are generally regarded as low-risk and are more likely to repay their obligations on time. 

  • Several External Factors May Also Influence Gold Loan Interest Rates 

The interest rates on gold loans are not only dependent on personal factors. In fact, several other external factors also play a huge role. Inflation is by far, one of the most important factors at play. The higher the rate of inflation in the economy, the higher the gold loan interest rates are likely to be. In addition to inflation, interest rates set by the RBI, supply and demand mismatch, and gold price movements are a few other external factors that also influence interest rates. 

  • Different Lenders Charge Different Gold Loan Interest Rate

Both banking institutions and Non-Banking Financial Corporations (NBFCs) offer gold loans in India. However, the rates of interest offered by them are most often very different. That’s why it is important to first compare multiple lenders with one another. This way, you can easily determine the one that offers a more competitive and attractive rate. 

While doing such a comparison exercise, remember to also check the reputation of the lender as well. It is important to choose a reputable lender who can ensure safe custody of your pledged gold. 

  • Gold Purity Can Determine the Gold Loan Interest Rate

The purity of gold that you pledge to avail a loan can also have an effect on the interest rate applicable to you. Gold is usually offered in three common purities – 18-Karat, 22-Karat, and 24-Karat. 

18-Karat gold, also stylised as 18K, contains only 75% gold, with the rest 25% being alloys of other metals. On the other hand, 22-Karat gold, also stylised as 22K, is 91.6% pure gold, with the remaining 8.4% being alloy metals. And finally, 24-Karat gold, also stylised as 24K, is 99.9% pure gold.

As you can see, the higher the Karat, the greater the purity of gold. Lenders usually take the purity of gold being pledged into consideration when determining the gold loan interest rate  applicable to you. And as you might have guessed, higher-purity gold usually gets lower interest rates.


These are just a few of the most important concepts regarding gold loan interest rates that you need to keep in mind. If you’re planning on availing a gold loan in the near future, always make sure to first check the rate of interest on offer. Compare multiple offers and choose the lender that offers an attractive rate. 


Also, remember to use a gold loan calculator to determine the EMI that you would have to pay each month. Getting to know your obligations beforehand can not only give you an edge, but also lead you to make a good financial decision. 

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