Key Factors Influencing Gold Loan Eligibility

An urgent need for funds, and you have gold at home! Turns out, you already have access to one of the quickest ways to access a gold loan. Gold loans prove to be of great help in times of emergency. They are popular for their –

• Fast processing
• Minimal documentation
• Flexible terms

But this doesn’t mean that you would straightaway be able to march towards a bank or lender. Why? Because there is a criterion that defines whether you are eligible or not. 

So, let’s learn what factors can influence the amount you would be able to get and at what gold loan interest rates.

Your Age: Are You Old Enough or Too Old?

Yes, your age matters when applying for a gold loan.

• You need to be at least 18 years old to apply.
• The upper limit is usually 75 years.
• If you are above 70, most lenders will ask you to add a co-borrower (usually a younger family member).

Tip: If you are applying on behalf of elderly parents, be ready to co-sign the application.

You Must Be an Indian Resident

To apply for a gold loan, you need to be a resident Indian citizen. NRIs and foreign nationals typically are not eligible, even if they own gold in India.

The Gold You Pledge Must Meet Standards

Not all gold is accepted. Lenders have clear guidelines:

• Gold Jewellery: Between 18 and 22 karats.
• Gold Coins: 24 karat coins. The total coin weight allowed is up to 50 grams per customer.

An important thing to note: Hallmarked jewellery is best to avoid confusion during valuation.

Loan Amount and Required Documents

Documentation depends on how much you are borrowing.

• For loans below ₹25 lakh, income proof is not required. This makes gold loans perfect for self-employed individuals or homemakers.
• For loans ₹25 lakh and above, you will need:
  • PAN Card
  • Income Tax Returns (ITR)
  • Standard KYC documents (ID and address proof)

Loan-to-Value Ratio (LTV): How Much Can You Get?

The Loan-to-Value (LTV) ratio is how much loan you can get against the gold you pledge. RBI guidelines allow lenders to offer up to 75% of the current market value of the gold. So, you can get a higher loan for the same gold if the prices are high.

Credit Score: Not Mandatory, But Still Important

A gold loan is secured, so you do not have to rely on your CIBIL score.

But here’s the catch:

• A better credit score might help you get a lower gold loan interest rate.
• If you have a poor repayment record, lenders might offer higher interest rates or lower loan amounts.

Tip: If you are planning a big loan, check your CIBIL score first; it could save you money.

Gold Loan Interest Rates and Tenure

The interest rate on gold loans typically ranges between 10% and 17% per annum, depending on:

• The lender
• The loan amount
• Your repayment track record
• The tenure (usually 1 to 4 years)

Tip: Compare interest rates from multiple banks and NBFCs before deciding. A small difference in rate can save you a lot in the long run.

Repayment Capacity

While income documents are not always needed, especially for smaller loans, lenders may still evaluate your ability to repay, especially if:

• You apply for a high-value loan
• You have existing loans
• You are nearing retirement age

Tip: Choose a loan amount that you are confident about repaying on time to avoid penalties or loss of pledged gold.

Gold Loan Eligibility at a Glance

Final Thoughts

So, now you know that a gold loan can be a fast and flexible financial option for you if you know how the eligibility part works. 

• Your age
• Gold purity
• Documents you need 
• Your credit score

All factors are important in deciding your eligibility and the gold loan interest rates you are offered.

Why not do a little preparation to get the best deal without risking your gold?