Gold loans continue to be one of India’s most popular secured lending options. Recent practices mean small-ticket gold loans may fetch higher Loan-to-Value (LTV) ratios, making it easier to access cash. However, as loan amounts grow, terms become stricter and risks like auctions, valuation changes, and costs remain. Borrowers should compare lenders carefully before pledging their gold.
More Value for Small Loans
Under tiered LTV structures, lenders offer higher percentages of gold value for smaller loans. This helps households, farmers, and micro-entrepreneurs access quick liquidity without heavy paperwork.
Example:
Loan up to ₹1 lakh: up to 75–80% LTV
Loan above ₹5 lakh: around 65–70% LTV
Stricter Terms for Larger Loans
As ticket sizes grow, lenders become more cautious:
Lower LTV ratios on large loans
More frequent collateral valuation
Stricter repayment timelines or interest servicing requirements
This protects lenders from gold price volatility and ensures responsible borrowing.
Costs and Risks Remain
Even with higher LTVs on small loans, gold loans are not risk-free:
Auction Risk: If you default, pledged gold can be auctioned after notice.
Valuation Changes: Gold prices can fluctuate, impacting collateral value.
Fees & Interest: Processing fees and interest rates vary by lender.
Borrowers must weigh these factors and compare interest rates, repayment terms, and release policies before choosing a lender.
Best Practices for Borrowers:
Borrow Only What You Need: Avoid over-leveraging your gold.
Check the LTV Offered: Different lenders have different ratios.
Understand Auction Rules: Know your rights if you default.
Plan Repayments: Especially for bullet loans or large-ticket gold loans.
Conclusion:
While small-ticket gold loans may now offer higher value against your gold, larger loans come with stricter terms. The costs and risks — from valuation swings to possible auctions — remain, so always compare carefully and choose the lender that best fits your needs.
Frequently Asked Questions (FAQ)
1. Why do small-ticket gold loans offer higher LTVs?
To support financial inclusion, lenders allow higher percentages of gold value for smaller loans with lower risk.
2. What happens with large-ticket gold loans?
They usually have stricter LTV caps, tighter repayment terms, and more frequent valuations to manage risk.
3. Are gold loans risk-free?
No. Risks include loss of pledged gold through auction in case of default, valuation changes, and varying fees and interest rates.
4. How can borrowers reduce their risk?
Borrow only what you need, choose a transparent lender, understand auction rules, and plan repayments carefully.
5. Should I compare lenders before taking a gold loan?
Absolutely. Interest rates, fees, LTVs, and release timelines vary widely, so comparing can save money and protect your gold.
Published on : 15th September
Published by : SMITA
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