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Top Tips for Getting the Best Interest Rates on Gold Loans

Indians have an affinity for physical gold as an investment and a luxury purchase. When in need of urgent funds, a majority of Indian households turn to gold. Some sell the asset while others mortgage it to fulfil short-term financial requirements. Rather than parting away from your ornaments that hold not just monetary but also emotional value, you can apply for a gold loan instead.

A gold loan is a favoured option and is used by many to get immediate access to funds. As it falls under the secured category of loans, the interest charged on these is comparatively lower than other unsecured loans. However, these vary from lender to lender and are affected by several factors. Therefore it is essential to note the various factors that impact your loan rates and learn some tricks to lower the interest.

What factors determine the interest rate of your gold loan?

Everyone wants to get a gold loan with interest rates as low as possible. But do you know on what basis these rates are decided? Here are some factors that may have a huge impact on the interest rate offered to you:

Loan Amount

The amount you look to borrow is one of the most important factors which affects the interest rate offered. Lenders tend to charge higher interest rates on higher loan amounts. This helps the financial institution accommodate the risks associated with lending more funds. 

Loan-To-Value (LTV) Ratio 

The LTV is used by financial institutions to assess the risk they will take on by giving you a gold loan. Simply put, it points towards a borrower’s credit risk. When getting such a loan, the lender offers you money, usually lower than the actual value of your asset. For example, if your gold is valued at ₹1 Lakh, and if the LTV offered is at 60%, then you will receive ₹60,000 as a debt against your asset. A high LTV requires a smaller down payment, however, the interest rates for such credits are higher, and vice versa.

Also Read: The Four Most Important Factors Affecting the Gold Rate


Your earnings represent your repayment capabilities. A stable income can help assure the lender of your creditworthiness, making it easier for you to get a loan at favourable interest rates. In case your earnings per month are on the low, it is likely that the lender will charge a higher interest. 

Market Conditions

Gold loan interest rates might also be influenced by changes in the macroeconomic environment. Inflation, demand for the yellow metal, revisions in government policies, and fluctuations in gold prices have a huge impact on your interest rates. In addition to this, the repo rates set by the RBI are used by lenders to fix their respective lending rates. Hence, a change in the repo rate leads to a change in the lender’s Marginal Cost of funds-based Lending Rate (MCLR), and in turn a change in your gold loan’s interest rate. 

Tips and Tricks to Get Gold Loans at the Lower Interest Rates:

Getting a gold loan at a low interest rate is the goal of every individual looking to acquire funds by mortgaging their ornaments. Here are a few tips and tricks that may help you successfully lower your interest rates. 

Compare Offers

With multiple options available in the market like the Bajaj Gold Loan, Muthoot Finance Gold Loan, and so on, it is difficult to choose a lender. In order to get the most suitable offer possible, you will have to undertake extensive research. Check out multiple financial institutions that offer such a loan and compare their interest rates and other features, to find an offer that suits your needs. 

Maintain a Good Credit Score

There is no better parameter to assess your repayment abilities than your credit report and score. While the eligibility criteria for getting a gold loan are quite simple, having a good credit score and income can do wonders for you. While there is no set requirement, it is beneficial to maintain a good credit score when applying for a gold loan. Additionally, this loan can also help you further build your score if you keep paying your instalments on time over the decided tenure. 


If you have a spotless repayment history and a good income, some lenders might be willing to indulge in a negotiation. Show off your skills and explain why you should be given the loan at a rate lower than the one offered. If you have received quotations from other financial institutions, you can also use those to your advantage and build a strong case for yourself. 

Repayment Frequency

Choosing an effective EMI plan might also play a small role in helping you lower the interest rate charged on your gold loan. Make sure that the frequency of your instalments is high. This step assures the lender of your repayment capability and may help you get the required gold loan for a lower interest rate.

Armed with the knowledge, forge onto the battlefield. Pick and choose from the multiple gold loan providers, apply these tricks and enjoy the fruits of your labour. Utilise the aforementioned tactics and get the required loan at a lower interest rate.

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Also Read: The Right Way To Structure Your Home Loan

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