According to the World Gold Council (WGC), Indians hold approximately 24,000 tons of gold in personal gold assets, which accounts for 11% of the world's total gold reserves. The same council also reports that ₹13,888 crore of the ₹1.5 lakh crore investment made in gold in 2024 went towards digital gold. This shows that, regardless of the form, India has a strong affinity for gold.
When you are in an emergency, you can use both forms of gold to get a loan against it. There are, however, key differences between a physical gold loan and a digital gold loan. In this blog, we will compare the benefits of physical vs digital gold loans based on process, time, terms, and tenures.
What is a Physical Gold Loan?
A physical gold loan is a type of secured loan where you get funds by providing your physical gold, like jewelry and coins, as collateral. You provide your gold jewelry, coins, or gold bars as security for getting funds against them.
The purity, weight, and market price of your gold determine the amount of the loan. Once you repay your loan along with the interest, the lender returns your pledged gold to you safely. Physical gold loans are one of the oldest forms of lending that is still popular because of all the benefits they offer.
Features of Physical Gold Loan
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Benefits of a Physical Gold Loan
Here are some of the main benefits of a physical gold loan:
- Easy Access to Money: It can be disbursed and approved fast, making it handy in case of emergencies.
- Higher Trust Factor: Visiting lenders physically is safer, as you can speak directly to the lender.
- Retain Gold Ownership: The ownership rights are retained by the borrower even after pledging.
- Reduced Interest Rates: The loan is secured, and this makes it cheaper to borrow funds as compared to unsecured loans.
- Simple paperwork: A Simple application, basic KYC, and gold proof are all you need to apply for the gold loan.
What is a Digital Gold Loan?
Digital gold refers to investments in gold derivatives, such as Gold Mutual Funds, Gold ETFs, and Sovereign Gold Bonds, among others. A digital gold loan is a secured loan in which the borrower uses their digital gold holdings as security to obtain a loan online without physically surrendering the gold.
It is entirely digital, fast, and paperless, allowing borrowers to apply, receive approval, and access funds online or via a mobile application. It offers immediate access to funds secured by gold held in a digital form. The lender stores the pledged digital gold in insured vaults until the loan period is over.
Features of Digital Gold Loan
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Features |
Description |
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Loan Amount |
Up to ₹2 crores |
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Interest Rate |
Starting at just 9.5% |
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Disbursal |
Quick |
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Repayment |
Flexible |
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Verification Process |
Online, Paperless |
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Documentation |
Minimal (Basic KYC) |
Benefits of a Digital Gold Loan
- No Need to Visit Lenders Physically: You don't need to visit lenders physically to get a gold loan and pledge your gold ornaments.
- Fully Online: It is a simple process where everything is done entirely online. Online applications are available at any time and from any location.
- Easy and Quick: Easy approval and cash disbursement without any visit to a branch or any paperwork.
- Flexible Repayments: Various repayment plans according to the cash flow of the borrowers.
- Safe and secure: Gold is held in insured, secure vaults by custodians.
Physical Gold Loan vs Digital Gold Loan: Key Differences
Here are the key differences between physical vs digital gold loans you must know before applying for a gold loan:
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Which Type of Gold Loan Should You Choose?
The choice between a physical gold loan and a digital gold loan will always depend on your requirements. However, here are some tips that will help you understand what kind of loan you should go for:
- If you have excess physical gold sitting at home and need a larger loan amount with easy repayment, a traditional physical gold loan would be the best.
- If you don't want to visit lenders physically with all your gold, then you should apply for a digital gold loan.
Things to Consider When Choosing the Right Type of Gold Loan
When choosing between a physical gold loan and a digital gold loan, take your time. The choice is subjective based on your preference, lifestyle, and the urgency of your need. Here are some factors that you should consider before making the final call:
1. Comfort with technology
If you are accustomed to internet banking, online transactions, and mobile apps, a digital gold loan is a much better option. However, if you are someone who likes communicating in person or is not familiar with the online world, a branch-based physical gold loan will feel more reassuring.
2. Urgency of funds
Both are fast, but the speed still varies. For example, if you visit a branch with your jewellery, you can receive funds within a few hours of the valuation. Digital gold loans are faster, as they involve no verification.
3. Documentation requirements
A physical gold loan may need physical documents, whereas a digital gold loan is fully digital and paperless. You will, however, be required to complete the KYC process.
4. Location and accessibility
If you are near a lender's branch, going there for a physical gold loan is more convenient. But if going to a lender feels difficult or is time-consuming, going for a digital loan is a better option.
Tips to Maximise the Benefits of Your Gold Loan
Regardless of whether you opt for a physical gold loan or a digital gold loan, the goal is to maximise returns while incurring minimal expenses. Here are some beneficial tips that will help you get the best out of your lending experience:
1. Compare interest rates among lenders
Avoid choosing the very first lender that you come across. Banks, NBFCs, and fintech lenders all provide gold loans at different interest rates. Even a slight variation in the interest rate will make a massive difference in the amount of interest you have to pay for the loan overall.
2. Consider the Loan-to-Value (LTV) ratio
The LTV ratio decides the amount of money you can borrow on your physical gold. If your jewellery is worth ₹1,00,000, and the financier provides 85% LTV, you can get a loan of up to ₹75,000. Go with lenders that offer the maximum LTV ratio.
3. Check for safe custody and insurance
Since your gold is used as collateral, you should always feel confident leaving your gold with lenders. Therefore, ensure that the lender has secure storage options and insurance coverage.
4. Utilise online tracking (for electronic loans)
If you go for a gold loan online, utilise all the conveniences of the online platform to the fullest. Monitor your repayment status, interest payments, and reminders on a daily basis through the lender's website or app. It keeps you updated and prevents late payments.
5. Borrow only what you need
It is very tempting to borrow a loan against the whole value of your gold. However, do not forget that a loan is still a liability and that you'll also have to repay it after the tenure ends. Only borrow the amount of money you truly need and that you can repay within the term you decide.
To Conclude
Both physical gold loans and digital gold loans are excellent options for obtaining funds in emergencies. A physical gold loan requires you to visit a lender or a branch in person, whereas a digital gold loan is entirely online and much more convenient. The choice will always be based on your needs, financial requirements, and convenience.
Need urgent funds? Apply for a Gold Loan with Poonawalla Fincorp today and get the lowest interest rates and easy repayment options now. You can apply for a loan amount of up to ₹50 lakhs. The interest rate starts at just 11% p.a., ensuring that the loan is affordable.
FAQs
Is it safe to apply for a gold loan online?
Yes, applying for a gold loan online is safe if done through official apps or websites of trusted financial institutions. These platforms use encryption and secure verification methods.
What happens if the gold price falls after I take the loan?
If gold prices drop significantly, the lender may ask you to pledge additional physical gold to maintain the loan-to-value ratio.
Can I pledge a portion of my gold and retain the rest?
Yes, lenders allow you to pledge only the amount of physical gold or digital gold you need, instead of all your holdings.
Do lenders accept broken jewellery or old ornaments for gold loans?
Yes, as long as the purity of the physical gold meets the required standards, the shape or design does not matter.
Is there a difference in processing fees between gold loans and digital gold loans?
Yes, traditional gold loans may include storage and valuation fees, while digital gold loans often have lower or minimal processing costs.
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