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Gold loan vs selling: Which works better in a crisis?
A gold loan from a bank or NBFC can be processed within hours, especially if your KYC is ready and the gold is valued.
Written by Adhil Shetty
August 18, 2025 12:36 PM IST
4 min read
4 min read
When a crisis strikes, many Indian households turn to gold, a trusted, tangible asset that can be quickly converted into cash. (Representative Image)In India, gold isn’t just considered jewellery but also a safety net. When a crisis strikes, many Indian households turn to gold, a trusted, tangible asset that can be quickly converted into cash. But is this the right approach? Or should you instead take a gold loan? Let’s compare both options based on some crucial parameters to find out which may be right for you and when.
How quickly can you get cash?
Whether you’re selling or pledging gold, both are quick. Selling to a jeweller or gold buyer gives you instant cash but you may need to shop around to get the best rate. A gold loan from a bank or NBFC can be processed within hours, especially if your KYC is ready and the gold is valued. So, selling gives you a slight advantage if you are in an absolute urgency and want to avoid paperwork. For most other situations, you can choose either option.
Do you want to keep the gold?
Selling is final while a gold loan allows you to retain ownership of the ornaments. In case of ornaments that are of sentimental value, taking a loan is a safer option versus selling.
How much can it cost?
Gold loan interest are in the range of 8.00% to 12.50% a year (as of July 23, 2025). Coupled with processing fee, the longer you take to repay, the more interest you’ll pay. Selling the gold, on the other hand, involves no interest cost, but you may get less than the market price due to deductions. So, if you are confident of repaying quickly, a loan may be cheaper. But, for longer periods, selling might save you money.
How much can you get from a loan?
As of Aug 2025, RBI has capped the loan-to-value (LTV) ratio for gold loans at 75%. Specifically, gold loan LTV caps are 85% for loans up to ₹2.5 lakh, 80% for ₹2.5–5 lakh, and 75% for above ₹5 lakh. On the other hand, selling can get you the full market value of the gold, save for a few deductions. If maximising asset value is the priority, selling has the advantage.
What’s the risk?
Selling gold carries zero repayment-related risk, since the sale is full and final. But, a gold loan must be repaid on time to prevent the gold from being auctioned, sometimes at an unfavourable price.
Which should you choose?
Each option comes with pros and cons, and deciding what’s right for you depends on your unique situation. Taking a gold loan is the right choice if the jewellery holds sentimental value and you intend to keep it. It’s also a smarter choice if you expect gold prices to rise in the future, giving you a chance to realise a higher future value for your asset. A gold loan also makes sense if you have stable income and are confident of repaying the loan in time.
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Selling the gold is the best option if you want the highest possible value for your gold and have no emotional attachment to the jewellery. This is a simple, one-time transaction that doesn’t involve repayments, EMIs, or interest concerns. All in all, it is a good option if you want to reduce financial stress without taking on new debt. In the end, the right choice depends on your needs and priorities. Weigh the costs, benefits, and trade-offs before deciding.
Adhil Shetty is the CEO of BankBazaar.com
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