A gold loan is a secured loan where you pledge gold ornaments (and sometimes coins, subject to policy). The lender values the gold, applies an LTV (loan-to-value) percentage, and disburses the eligible amount.
Advantages
- Speed: valuation and disbursal can often complete the same day after KYC
- Rate: frequently lower than unsecured personal loans
- Documentation: lighter income paperwork on many small tickets
- Flexibility: useful for short-term liquidity without selling family jewellery
Disadvantages
- Pledge: you cannot use the jewellery until the loan is closed
- LTV cap: you only receive a portion of the gold’s assessed value
- Default risk: prolonged non-payment can lead to auction after due process
- Interest accumulation: schemes differ; understand whether interest is serviced monthly
When gold loan makes sense
- Short-term need with a clear repayment source
- You want to avoid selling gold at a weak price
- Personal loan rates available to you are much higher
When to be careful
- No realistic plan to repay within the scheme tenure
- You are stacking multiple gold loans without tracking total interest
- You only compare headline rates and ignore LTV and foreclosure rules
Practical comparison tips
| Check | Why it matters |
|---|---|
| LTV % | Determines how much cash you actually get |
| Interest type | Monthly servicing vs end-of-tenure schemes |
| Foreclosure | Cost of closing early |
| Purity rules | What jewellery is accepted |
Explore gold loan options on LoanPao and compare with a personal loan if you prefer not to pledge jewellery.