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De-bunking Common Gold Loan Myths

By Chanel Rick - Aug 16,2022
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Skinny jeans aren’t going out of style, and neither are traditional investments. For centuries, Indians have invested a fair portion of their wealth in gold-based assets like ornaments, bonds and other related investments. It’s a great strategy since this precious metal is limited but high in demand. Besides, it’s an investment that bodes well with people’s status and reputation.  

Wearing a pair of gold earrings, ring or chain are common trend even among the masses. Though, we can’t deny the awe-struck feeling South Indian weddings incite – heaps of gold ornaments worn by brides and sometimes the guests, too!  

Whether the display incites admiration or pangs of jealousy, investing in gold these days is as easy as ordering groceries online. And, we are talking about digital gold! Some online apps and web-based platforms offer the convenience of purchasing bite-sized bits of gold. People are spoilt for choices with such a variety before them. Furthermore, people can avail a loan against the gold they have amassed over the years.  

Unfortunately, this momentary confusion is susceptible to misinformation. Much like anything else in the world, gold loans are prone to misconceptions, too. People recite the experiences of others with the commodity or regale tales of their accounts, and this could cloud the judgement of others. Moreover, narrators and listeners often forget that these accounts are limited to certain conditions and situations.  

In the midst of such chaos, potential borrowers have been led astray from the bounty of gold loans. But, you could use this as a chance to learn the correct information and generate awareness.  

5 Myths on Gold Loans Debunked  

While surfing the internet for safe sources of funds, borrowers are likely to believe ill-informed facts about gold loans. If you’ve been contemplating applying for a gold loan, then this is information you sorely need!  

 “The gold could be misplaced!”  

Some people believe that once the gold is pledged, there’s a strong possibility that it will be misplaced or sold. However, that’s a false belief. When a borrower brings forth their asset for a gold loan, it will be held in safe custody. Gold loan lenders follow strict safety measures to ensure that these pledged assets are not used for illicit activities or auctioned off without the borrower’s consent.  

Moreover, some gold loan lenders offer services wherein their representatives directly visit the borrower’s registered address for collection. Also, they carry a karat meter for gold appraisal to verify the quality of the asset. Lastly, to avoid such incidents, it’s strongly advised that borrowers only engage with government-approved financial institutions like banks or NBFCs.  

 “Gold loan lenders charge hefty interest rates!”  

Before approaching lenders or browsing online, others might dissuade borrowers by falsely claiming that gold loans levy high-interest rates. Once more, that’s not the case. Most gold loan lenders offer reasonable interest rates, with some being competitive in comparison to unsecured credit. Borrowers can avail a substantial amount through the loan by pledging their gold.  

Additionally, there are various criteria that estimate the interest rate levied on the loan. Some of these include gold purity, the loan amount requested, present inflation crisis in the market, the value of the gold, and repayment capacity. These factors play a big role in evaluating the interest rate the lender can levy, and in some cases, it could significantly lower it, too.  

 “You can only avail gold loans from jewellers!’  

Those still holding onto old, traditional beliefs might try to spew outdated information like this, but it’s not entirely correct. While gold jewellers can approve certain gold loans, there are other alternative providers like banks and NBFCs. They can offer borrowers the guarantee of security for their pledged gold and sanction considerable loans with high LTV.  

In India, there are organised and unorganised gold loan sectors. However, the latter has a wider market share, although with its share of risk. Informal lenders might charge unreasonably high-interest rates. There’s also an increased risk of loss of ownership of the pledged gold.  

“It’s a long and tedious application process”  

While searching for quick sources of funds, it’s easy for borrowers to be discouraged at the thought of multi-step processes. With their desperation clouding these decisions, it’s crucial to clear the air around this misconception. On the contrary, gold loans are disbursed quickly once the verification and valuation of the pledged item are complete. Ideally, it’s one of the quickest ways for one to avail funds without selling off their investments.  


To briefly explain, gold loans are the swiftest way of securing funds. They require minimal documentation and have simple eligibility riteria. Also, the doorstep services provided by some lenders can further expedite the loan process.  

 “Only certain types of jewellery qualify for gold loans!” 

Investors could have amassed their gold portfolio through investments and gifts. These yellow metal assets could be in the form of ornaments, but some people might have them believe that banks have standards for them. In reality, borrowers can avail a loan against gold jewellery if it falls within a karatage of 18-24 karats. 

If the purity of the gold ornaments meets the regulated criteria, the lenders will sanction the loan. Hence, it’s best to pledge assets with a 24 karatage to avail a higher LTV.   

With these myths busted, aren’t you relieved? Availing a gold loan couldn’t be easier! They’re ideal for financing short-term monetary requirements like educational fees, weddings, etc. Simply approach a bank or NBFC, or you could just hop on over to Bajaj MARKETS! Apply for a hassle-free gold loan on the website or app today. 


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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522