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Which Bank Offers the Cheapest Gold Loan? Where Is the Processing Fee Zero? Must-Know Facts Before Pledging Your Gold

Siddhi Jain | June 5, 2025 3:15 PM CST

In times of financial crunch, gold often comes to the rescue. In India, people across income groups invest in gold — be it the wealthy or the middle class. Not only is it a form of savings, but it also opens the door to gold loans, where individuals can pledge their gold and receive money in return.

With the rising prices of gold and increased demand, gold loans have become more popular. To ensure transparency, the RBI has implemented a stricter draft framework so that all lenders follow uniform rules and avoid confusion. Here's a comprehensive guide to the cheapest gold loan options and key things to know before you go ahead.

💰 Where Can You Get a Gold Loan at the Lowest Interest Rate?

Bank/NBFC	Interest Rate	Loan Tenure	Processing Fee
SBI	8.55% – 10.25%	3 to 36 months	0.50% of loan amount, min ₹500
HDFC Bank	9.30% – 17.86%	3 to 24 months	Up to 1% of loan amount
Axis Bank	Starts at 17%	6 to 36 months	₹300 to 0.5% (depends on loan)
Canara Bank	9.25%	12 to 24 months	0.50% of loan, min ₹500
Bank of Baroda	Starts at 9.15%	12 to 36 months	No fee up to ₹3 lakh
Punjab National Bank	Up to 9.25%	As per bank	0.30% + GST
Central Bank of India	8.40% – 9.50%	Up to 12 months	0.50%, min ₹250
Kotak Mahindra Bank	8% – 24%	Up to 4 years	Up to 2% + GST
Federal Bank	Starts at 8.99%	As per bank	Up to 3% + GST
Indian Bank	8.65% – 10.40%	Up to 12 months	Zero
IDBI Bank	At bank’s discretion	3 to 36 months	1%
IndusInd Bank	9.60% – 16.00%	Up to 12 months	1% + GST
Bajaj Finserv	Starts at 12.99%	1 to 36 months	As per company policy
Muthoot Finance	12% – 27%	7 days to 36 months	Varies by scheme
Manappuram Finance	14% – 29%	3 months	As per company policy

Source: ClearTax

📊 How Is the Gold Loan Amount Decided?

The amount you can get depends on the value of the gold you pledge. This is determined by the Loan-to-Value (LTV) ratio. As per RBI rules, the LTV cannot exceed 75%. For example, if your gold is worth ₹1,00,000, the maximum loan you can receive is ₹75,000.

The value of your gold is based on its purity and weight, typically calculated using the 30-day average price from IBJA (India Bullion and Jewellers Association).

💡 What Should You Check Before Taking a Gold Loan?

According to S. Sathya Ramanand of HDB Financial Services, before opting for a gold loan, carefully evaluate:

Interest rates
Loan tenure
Repayment terms
Processing fees
Hidden charges or risks

Sometimes, attractive offers may come with hidden penalties or high late payment charges. Always read the fine print and choose a trusted lender — don’t fall for low interest rates alone.

🪙 What Kind of Gold Is Accepted?

Most banks and NBFCs accept jewelry made of 18 to 22 karat gold. Some also accept 24 karat bank-issued gold coins, usually with a limit of 50 grams per customer. Items like gold bars or bullion are typically not accepted.

📉 What If Gold Prices Drop After Taking a Loan?

If gold prices fall significantly and the value drops below the 75% LTV ratio, the lender may ask you to:

Pledge additional gold, or
Repay part of the loan

Minor fluctuations don’t usually affect the loan, but in volatile markets, this is a potential risk. If prices rise, you benefit only if you prepay and refinance your loan.

⚠️ When Is a Gold Loan Not a Good Option?

Avoid a gold loan if:

You're unsure about repaying on time
You’re planning long-term borrowing
Your gold has emotional or sentimental value
You don’t understand loan terms or aren’t financially disciplined

If you default, your gold may be auctioned, and your credit score will be affected — making it harder to get loans in the future.

🛑 What Happens If You Can’t Repay the Loan?

Your gold will be confiscated and auctioned
A loan default is reported to credit bureaus
Late fees and penalties will increase your debt
Your creditworthiness for future loans will be damaged

✅ Bottom Line

Gold loans can be a great short-term solution for urgent needs like:

Medical emergencies
Children's school fees
Temporary business expenses

But they require careful consideration. Compare interest rates, check the processing fees, understand repayment terms, and always borrow from a reliable lender. Don’t let a short-term fix become a long-term burden.