7 things you should think about before taking a gold loan

Gold loan: You may need additional financial support to accomplish some of your planned expenses or aid in an emergency at certain times in your life. Whether you require funds for a medical emergency, wedding, vacation, debt consolidation, or higher education, using the value locked in your gold assets is worth it. You may bring your gold to the lender and get a percentage of its value as gold finance. However, many people get listed for defaulting their loan repayments, limiting their access to further credit facilities and causing them to lose their hard-earned gold assets. That is why it is essential to think twice before availing of a gold loan.

If you are stuck in a tight corner and need to take a loan, here are a few things you must know before committing.

Loan Purpose

Before applying for a gold loan, think about the purpose you need money. Ask yourself if the intended purpose is worth putting your gold at stake. Remember, you will find multiple lenders offering gold loans in the market. You must compare their terms and conditions and select the most appropriate one for your situation. Try to find a lender offering ample loan amounts at competitive interest rates with flexible repayment options. Also, check their pre-payment and late payment charges, and ask what would happen in case you fail to repay the loan.

Loan Term

Consider your loan term before taking a gold loan. Once the lender approves your gold loan, you have to repay the borrowed amount along with the gold loan interest cost. Many lenders offer different repayment plans that the borrowers may choose according to their available funds and repayment capacity. 


Different plans include paying interest upfront and principal later, interest-only and principal at the loan term-end, both principal and interest after a year, or repayment through regular EMIs. Ask the lenders about their repayment plans before committing for a gold loan. Know if you can pre-pay the loan and what is the maximum loan term to pay the EMIs.

Current Financial Condition

This is another factor you must consider before applying for a gold loan. Can you conveniently manage your loan repayment while sustaining your regular living expenses? Create a monthly budget to get an idea of how much disposable income you have and how much you can borrow. Taking a gold loan without considering your current financial condition can drive you into a never-ending debt circle. Therefore, ensure you can manage your daily expenses and still adjust loan EMIs into your monthly budget. 

Credit History

Although many gold loan lenders do not check your credit score before lending gold finance, you must look back and determine your repayment habits before applying for a gold loan. If you have a history of making late payments, you must manage your finances well before getting another loan. 

Check your budget and choose a repayment plan that best suits your repayment capacity. Look at the different gold loan schemes offered by your lender and choose a repayment plan you are convenient with. Even if your lender does not ask for your credit score, you must check it to know your chances of default. If you have a bad credit history, consider improving your habits first. 

Additional Fees and Charges

Apart from the principal amount and gold loan interest cost, lenders may charge several other fees and charges, including processing charges, foreclosure charges, etc. Finding a lender offering the lowest charges of these types help save money and keep the gold loan cost low. Some reputable lenders committed to customer satisfaction offer zero processing charges and no foreclosure charges at all. Also, enquire about the late payment charges, documentation charges, etc., to calculate the loan cost and borrow the one most suitable to your budget.

Being a secured loan, gold finance is one of the most accessible loan options available today. They are easy to acquire and give you instant access to funds by using the value in your available gold assets. However, it puts your gold assets at stake, which you may lose if you fail to repay your loan. That is why it is imperative to think twice before availing of a gold loan. Choose the right lender to tread with caution and avail a gold loan to meet your expenses.

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