Gold loan process: All you need to know about borrowing against the yellow metal

Besides banks such as SBI, ICICI Bank, HDFC Bank etc., non-banking financial companies (NBFCs) also offer gold loans to individuals. NBFCs which offer gold loans include Muthoot Finance, Manappuram Finance etc.

The amount of money a person can borrow against a gold item varies depending on the lender. ICICI Bank, for example, offers gold loans ranging from Rs 10,000 to Rs 1 crore. The State Bank of India provides gold loans ranging from Rs 20,000 to Rs 20 lakh. Muthoot Finance, on the other hand, offers gold loans starting at Rs 1,500 with no maximum restriction. In August 2020, the RBI increased the loan-to-value ratio from 75 percent to up to 90 percent through its regulatory statement.

Whether you have a gold loan with an EMI repayment plan or a gold loan with a bullet payment schedule, you have the option of paying the full amount owing before the loan term finishes. However, gold loans usually carry a pre-closure fee, which varies depending on the bank/NBFC.

The duration of the gold loan will also differ depending on the lender. For example, HDFC Bank offers gold loans with terms ranging from three to 24 months. The maximum repayment duration for an SBI gold loan is 36 months. Muthoot Finance offers a variety of gold loan plans with varying repayment terms.

Besides processing fees, borrowers may be required to pay for the valuation of gold that will be used as collateral by the lending institution. For example, HDFC Bank charges Rs 250 for loans up to Rs 1.5 lakh and Rs 500 for loans exceeding Rs 1.5 lakh as valuation costs.

A bank can charge fees in addition to processing and valuation fees. As a result, you should confirm all fees and charges with the bank or NBFC before taking out the loan.

To get a gold loan, you need to produce a number of documents to the bank or NBFC. Your identity proof (PAN, Aadhaar, etc.) and proof of address (Aadhaar, passport, Voter-ID card, etc.) are usually required, as well as your photograph. Any additional documentation that may be required varies across lenders.