A gold loan is a secured loan where gold jewellery is pledged as collateral.
Detailed Explanation
A gold loan is a type of secured loan in which borrowers pledge their gold jewellery or ornaments to a bank or NBFC in exchange for funds. The loan amount depends on the purity and market value of the gold. Gold loans usually offer quick disbursal, minimal documentation, and lower interest rates compared to unsecured loans. If the borrower fails to repay, the lender has the right to auction the pledged gold to recover dues.
Example
"For example, if you pledge 20 grams of gold worth ₹1,20,000, the bank may give you a gold loan of ₹85,000–₹90,000 depending on the gold purity and loan-to-value ratio."