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In any financial emergency, gold can help you to overcome the situation by unlocking its value quickly. One can pawn gold to raise money at relatively low rates. Amid the Covid-19 pandemic, demand for gold loans zoomed as households increased pledging of their gold holdings. According to data with the Reserve Bank of India, outstanding loans against gold jewellery given by banks rose 82% to Rs 60,464 crore as of March 2021, from Rs 33,303 crore as of March 2020.

Gold loan is a secured loan and its interest rates are lower than the interest rates of personal loan making it a preferred avenue. The RBI in August 2020 raised the loan-to value (LTV) to 90% for banks on gold loans from the earlier 75% in the wake of the pandemic.

Gold loan with EMI

A gold loan with an EMI option is most common. In this case, to pledge your gold, you can visit the branch of your nearest bank or non-banking finance company. According to regulations they would credit an amount in your bank account with a regular EMI option for a predetermined reimbursement period.

Interest rates

Among banks, Punjab and Sind Bank offers the lowest interest rate of 7.00% on a Rs 5 lakh gold loan. It has a reimbursement period of three years. Canara Bank is offering the second cheapest interest rate on gold loans which is 7.35% per annum.

State Bank of India and Indian Bank are currently offering gold loans at an interest rate of 7.50% per annum. Union Bank of India is offering 8.20% for loans up to Rs 5 lakh with tenure of 3 years.

Bank Interest rates (p.a.)

— Punjab & Sind Bank: 7.00%

— Canara Bank: 7.35%

— State Bank of India: 7.50%

— Indian Bank: 7.50%

— Union Bank of India: 8.20%

NBFCs charge comparatively higher interest rates between 9.24% to 12% per annum. Among NBFCs IIFL Finance offers cheapest interest rates at 9.48%. On the other hand, gold loan interest rate in Manappuram Finance is 12%.