Purchasing gold during Dhanteras and Diwali has been a long-standing tradition in India due to its association with Goddess Lakshmi, the goddess of wealth & prosperity. A Gold Loan can help you fund the purchase by allowing you to borrow funds against the gold you currently have. Gold loans offer the fundamental benefit of borrowing funds at a low interest rate without giving up ownership of your existing gold.
In this blog, we will explain how you can obtain a loan against gold to fund your purchase of gold jewellery this festive season. Continue reading to know more!
How a Gold Loan Can Fund Festive Jewellery Purchase
Gold has a long-standing cultural and religious significance in our country; in fact, a recent report by the World Gold Council stated that Indian households have around 24,000 tonnes of gold, nearly 11% of the world’s total gold reserve. At an auspicious time like Dhanteras, using a “gold-on-gold” approach helps you leverage your old family gold to purchase newer, higher-purity gold, compounding the joy of the season.
When you take a Gold Loan, you pledge your idle gold articles (like ornaments or coins) to a trusted lender. The lender will then test your gold for its purity and weight. Next, they’ll provide you a loan amount based on the current market value of the gold.
One of the key advantages is that you retain complete ownership of your gold as you’re not selling it. Once the loan amount has been repaid as per the agreed terms and conditions, you’ll get your pledged gold articles back the way they were given. This process lets you celebrate with new additions while keeping your old treasures secure.
Also Read: Gold Loan Tips for Dussehra 2025: Affordable Festive Financing
A 4-Step Plan to Buy Gold on Dhanteras
Follow this four-step approach to leverage the value of your existing gold items to fund festive jewellery shopping.
Step 1: Assess Your Need and Your Current Gold
First, decide on a clear budget for the new jewellery you want to purchase. Having a specific amount in mind prevents you from over-borrowing. Simultaneously, collect the idle gold items that you want to pledge. Having an idea of the approximate weight would help you get an idea of the loan amount you could get.
Step 2: Know Important Loan Features
Before taking a Gold Loan, pay attention to some crucial features:
- Interest Rate: It decides your total cost of borrowing. A lower rate means cheaper repayments.
- Loan to Value (LTV) Ratio: The percentage of your gold’s market value that the lender will offer as your loan amount. The maximum LTV ratio for gold loans taken for personal or consumption purposes, such as jewellery purchases, is now tiered at up to 85% for loans of INR 2.5 Lakh or less, 80% for loans between INR 2.5-5 Lakh, and 75% for loans above INR 5 Lakh.
- Repayment Tenure: The repayment periods available need to be reviewed to match your financial capacity and timeline.
Step 3: Choose a Trusted Lender and Apply
You should always pick a trusted and reputable financial institution to pledge your gold since it is a valuable asset. Such institutions are known for their transparent processes and secure storage facilities.
The application procedure for a Gold Loan is quick with minimal documentation. Most institutions only ask for basic KYC documents, but this may vary for different lenders. The process itself is swift, and once your application is approved, disbursal is almost immediate.
Step 4: Planning Your Loan Repayment
Your repayment plan will depend on your decided tenure and repayment style. You could pay a fixed regular EMI each month or have a floating interest rate. You also have the option to only pay interest each month and pay the principal in full at the end of the tenure (bullet loans). How you go about it rests on the terms of your loan. Regardless of the mode of repayment, always ensure you have enough funds to meet your EMI amount; this avoids the risk of defaulting.
Also Read: Gold Loans for Women: A Beginner-friendly Guide to the Process
Gold Loan vs Personal Loan: An Informed Decision
Buying gold on Dhanteras goes better when you compare the benefits of a Gold Loan against other financing options. Since a Gold Loan is a secured loan, it enjoys certain advantages over an unsecured Personal Loan when used to buy gold jewelry.
|
Feature |
Gold Loan |
Personal Loan |
|
Interest Rate |
Generally lower due to its secured nature. |
Higher, as it is an unsecured loan. |
|
Processing Time |
Very fast, often within a few hours. |
Can take from a few hours to few days. |
|
Credit Score |
A high credit score is not always required. |
Heavily dependent on a good credit history. |
|
Documentation |
Minimal; only basic KYC documents needed. |
Requires extensive documentation, including income proof. |
Also Read: Why Taking a Gold Loan is Smarter Than Breaking Your Fixed Deposit in an Emergency?
To Conclude
Dhanteras is undeniably the best time to buy gold, with cultural significance and the benefit of attractive deals and lenders. Instead of breaking into your savings or spending your salary to purchase gold, you can fund your festive jewellery purchase with a hassle-free Gold Loan from a trusted lender.
Poonawalla Fincorp provides hassle-free Gold Loan up to ₹50 Lakhs with up to 75% Loan-to-Value. Borrow at affordable interest rates with minimal paperwork and repay conveniently with flexible repayment tenure. Apply now!
Frequently Asked Questions
Which loan is best for buying gold?
Normally, a Personal Loan or a Gold Loan are ideal for the purpose of buying gold jewellery. Of the two, getting approvals on gold loans is easier; they usually charge lower interest, are quicker in processing, and demand very little documentation in comparison to a Personal Loan.
Can I buy gold with a Personal Loan?
Yes, a Personal Loan can be taken for buying gold, as there are no restrictions on its end use. But a Personal Loan at higher rates of interest and with stringent eligibility criteria becomes a costlier alternative. In comparison, a Gold Loan offers better terms and approval chances.
What is the eligibility for a Gold Loan?
To get a Gold Loan, you have to be a citizen of India, aged between 18 and 70, and own gold jewellery or coins of 18-carat purity and above.
How much loan can I get on 10g gold?
The loan amount depends on the gold’s purity and the day’s market rate. Lenders can offer up to 75% of the gold’s value, so if 10 grams of 22-carat gold is valued at INR 60,000, you could get a loan of up to INR 45,000.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply