How is gold loan interest calculated?

Gold loan interest can be calculated using two methods: (1) Flat Rate Method – Interest is calculated on the original principal throughout the tenure. Formula: EMI = (Principal + Total Interest) / Number of months. (2) Reducing Balance Method – Interest is calculated on the outstanding principal after each payment. This is cheaper than flat rate. Most banks use the reducing balance method.

What is the maximum LTV ratio for gold loans in India?

As per RBI guidelines, the maximum Loan-to-Value (LTV) ratio for gold loans is 75% of the market value of gold. This means if your gold is worth ₹1,00,000, you can get a maximum loan of ₹75,000. Some NBFCs may offer up to 80-90% LTV but this comes at higher interest rates and risk.

Can I prepay my gold loan without penalty?

Many banks and NBFCs allow gold loan prepayment without any penalty charges. SBI, HDFC, and most PSU banks offer zero prepayment charges on gold loans. However, some NBFCs may charge 1–2% as a foreclosure fee. Always check the loan agreement before taking the loan.

What happens if I don't repay my gold loan on time?

If you default on your gold loan, the lender has the right to auction your pledged gold to recover the outstanding amount. Lenders typically send multiple notices before taking action. A penal interest of 2–3% extra is also charged on overdue amounts. It's very important to repay on time or renew/extend the loan before the tenure ends.

What is the difference between flat rate and reducing rate in gold loan?

In flat rate, interest is always calculated on the original loan amount throughout the tenure, making it costlier. In reducing balance (diminishing) rate, interest is charged only on the remaining outstanding principal after each EMI payment, making it cheaper. For the same advertised rate, flat rate gold loans are significantly more expensive than reducing balance loans.

Gold Loan Interest Rate Calculator – EMI, Interest Rate & Loan Eligibility

Q: What is the current gold loan interest rate in India 2026?

Gold loan interest rates in India in 2026 range from 7% to 29% per annum depending on the lender. SBI offers rates from 8.75% p.a., HDFC Bank from 9.90% p.a., Muthoot Finance from 12% to 24% p.a., and Manappuram Gold Loan from 9.90% to 26% p.a. Rates depend on loan-to-value (LTV) ratio, tenure, and your repayment capacity.

Q: Which bank gives the cheapest gold loan in India?

Among public sector banks, SBI Gold Loan, Union Bank of India, and Indian Bank typically offer the lowest gold loan rates starting from 8.75% to 9.5% p.a. Private banks like HDFC, ICICI, and Axis Bank offer rates from 9.90% to 17%. NBFCs like Muthoot and Manappuram are faster to process but have higher rates (12–26% p.a.).

Q: How much gold loan can I get on 10 grams of gold?

The gold loan amount depends on the current gold price and purity. At today's gold price of approximately ₹7,200–₹7,500 per gram (22 carat), 10 grams of gold is worth about ₹72,000–₹75,000. At 75% LTV (RBI maximum), you can get a gold loan of approximately ₹54,000–₹56,250. For higher purity (24 carat), the loan amount will be proportionally higher.

Quick Lender Rate Fill

Loan Amount

₹

₹5K₹50L

Annual Interest Rate

% p.a.

1%36%

Loan Tenure

Months

160

Tenure Unit

Interest Rate Type

Processing Fee (Optional)

₹

Monthly Prepayment (Optional)

₹

📊 Your Gold Loan Summary

Monthly EMI
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Total Interest

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Total Payment

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Principal Amount

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Effective Rate (p.a.)

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Interest % of Total

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Principal —

Total Interest —

Processing Fee —

Total Cost —

📅 Repayment Schedule

Showing month-by-month breakdown of your gold loan repayment.

Month	EMI Paid	Principal	Interest	Balance
Total	—	—	—	—

Gold Loan Interest Rates – All Major Lenders (August 2026)

Compare gold loan rates across banks and NBFCs in India. These are indicative rates; actual rate may vary based on your loan amount, tenure, and LTV ratio. Always get a written offer before signing.

Lender	Interest Rate (p.a.)	Rate Type	Max Tenure	Max LTV	Processing Fee
SBI Gold Loan Lowest Rate Public Sector Bank	8.75% – 9.50%	Reducing Balance	36 months	75%	0.50% (min ₹500)
Union Bank of India Public Sector Bank	8.90% – 9.60%	Reducing Balance	36 months	75%	Nil
Indian Bank Public Sector Bank	9.00% – 10.00%	Reducing Balance	24 months	75%	0.25%
HDFC Bank Private Sector Bank	9.90% – 17.90%	Reducing Balance	24 months	75%	1% (min ₹1,000)
ICICI Bank Private Sector Bank	10.00% – 16.50%	Reducing Balance	12 months	75%	1%
Axis Bank Private Sector Bank	14.00% – 18.50%	Reducing Balance	36 months	75%	1.5%
Bajaj Finance NBFC	9.50% – 28.00%	Reducing Balance	12 months	75%	0–2%
Muthoot Finance NBFC (Gold Loan Leader)	12.00% – 24.00%	Flat Rate	12 months	75%	Nil
Manappuram Gold Loan NBFC (Gold Loan Leader)	9.90% – 26.00%	Flat Rate	12 months	75%	Nil
IIFL Finance NBFC	11.00% – 27.00%	Flat Rate	11 months	75%	Nil

⚠️ Rates are indicative as of August 2026 and subject to change. NBFCs that advertise flat rates may have effective rates significantly higher than stated. Use our calculator above with the Flat Rate mode to find the true cost.

How Gold Loan Interest is Calculated — The Complete Guide

Understanding whether your lender is using flat rate or reducing balance can save you thousands of rupees. Here's everything explained in simple terms.

1. Reducing Balance Method (Used by Most Banks)

This is the standard method used by SBI, HDFC, ICICI, and most scheduled banks. Your EMI stays fixed, but the interest portion decreases every month as you repay principal.

EMI Formula (Reducing Balance):
EMI = P × r × (1 + r)ⁿ / [(1 + r)ⁿ – 1]

Where:
P = Loan Principal (e.g., ₹1,00,000)
r = Monthly Interest Rate = Annual Rate ÷ 12 ÷ 100
n = Number of months (Tenure)

Example: ₹1,00,000 at 12% p.a. for 12 months → Monthly rate = 1% → EMI = ₹8,885 → Total Interest = ₹6,619

2. Flat Rate Method (Used by Muthoot, Manappuram, IIFL)

Here, interest is calculated on the full original principal throughout the entire tenure, even though you are reducing the balance every month. This makes flat rate significantly more expensive than reducing balance for the same stated rate.

EMI Formula (Flat Rate):
Monthly Interest = P × Annual Rate ÷ 12 ÷ 100
Total Interest = Monthly Interest × n
EMI = (P + Total Interest) ÷ n

Example: Same ₹1,00,000 at 12% flat for 12 months → Monthly interest = ₹1,000 → Total Interest = ₹12,000 → EMI = ₹9,333 → You pay ₹5,381 more vs. reducing balance!

⚠️ Important: If a lender says "only 12% interest" but uses flat rate, the effective annual rate (EAR) is actually around 21–22%. Always ask whether the rate is flat or reducing before you take any gold loan.

What is Effective Annual Rate (EAR)?

The Effective Annual Rate converts a flat rate to its equivalent reducing balance rate, so you can compare apples to apples. A 12% flat rate ≈ 21.5% reducing rate. A 15% flat rate ≈ 27% reducing rate. Our calculator shows you both, so there are no surprises.

💡 Pro Tip: Before choosing between banks and NBFCs, use our calculator to compare the actual total interest you will pay. Banks usually win on cost, but NBFCs win on speed (disbursement in 30–60 minutes vs. same/next day for banks).

Bullet Repayment vs. EMI Gold Loans

Many NBFCs offer bullet repayment gold loans — you pay only interest every month and repay the full principal at the end. This is common for short-term needs (3–12 months). Use the Interest Calculator tab above for bullet loans. For EMI-based repayment, use the EMI Calculator tab.

5 Key Factors That Affect Your Gold Loan Interest Rate

🏅 LTV Ratio

The higher the loan-to-value ratio (loan amount vs. gold value), the higher the rate. Borrowing 60% of gold value will get you a better rate than borrowing 75%.

📅 Loan Tenure

Shorter tenures (3–6 months) typically attract lower rates. Longer tenures (24–36 months) may have higher rates due to extended risk for the lender.

🏦 Lender Type

Public sector banks offer the lowest rates (8.75%+). Private banks are mid-range (10–18%). NBFCs are fastest but most expensive (12–29%).

✨ Gold Purity

Higher purity gold (22K or 24K) means higher collateral value and better loan terms. 18K gold may attract higher interest due to lower market value.

💰 Loan Amount

Larger loan amounts (₹5 lakh+) sometimes qualify for negotiated lower rates, especially at banks. Smaller amounts (under ₹50,000) are mostly at standard rates.

📊 Repayment Track Record

Existing customers with good repayment history may get preferential rates. Some banks also offer lower rates for salary account holders.

How to Use This Gold Loan Interest Rate Calculator

Enter your loan amount — the amount you need, not the value of your gold. Use the LTV tab to find the maximum loan you can get against your gold.

Enter the interest rate — use the lender preset chips to auto-fill rates from SBI, HDFC, Muthoot etc., or enter your own rate.

Set your tenure — choose months or years. Gold loans typically range from 3 months to 3 years. Shorter tenures save you more interest.

Select rate type — choose Reducing Balance for bank loans or Flat Rate for most NBFC loans (Muthoot, Manappuram). This matters a lot for true cost calculation.

Click Calculate — get your monthly EMI, total interest, repayment schedule, and visual breakdown. You can also add a prepayment amount to see how much interest you save.

💡 Expert Suggestion: Compare the same loan at SBI (reducing, ~9%) and Muthoot (flat, ~18%). The difference in total interest can easily be ₹15,000–₹30,000 on a ₹1 lakh loan. Banks take a bit more paperwork and time — but they save you real money.

Also check our Gold Loan EMI Calculator and Gold Loan Calculator for more options. For gehna (jewellery) loan specifically, see our Gehna Loan Calculator.

Frequently Asked Questions – Gold Loan Interest Rate

Most common questions answered clearly, based on RBI guidelines and current lender practices.

What is the current gold loan interest rate in India 2026? ▼

Gold loan interest rates in India (2026) range from 8.75% to 29% p.a. depending on the lender. SBI starts at 8.75% p.a., HDFC Bank from 9.90% p.a., Muthoot Finance from 12% to 24% p.a. (flat), and Manappuram from 9.90% to 26% p.a. (flat). Public sector banks generally offer the lowest rates, while NBFCs are more expensive but process loans much faster — often in under 1 hour.

What is the difference between flat rate and reducing balance gold loan? ▼

In a flat rate loan, interest is charged on the original principal throughout the loan. So if you borrow ₹1,00,000 at 12% flat for 12 months, you pay ₹12,000 interest regardless of how much you've repaid. In a reducing balance loan, interest is only on the remaining outstanding principal. The same ₹1,00,000 at 12% reducing costs only ₹6,619 in total interest — nearly half the cost. This is why comparing both is critical before you commit.

How much gold loan can I get on 10 grams of gold? ▼

At current gold prices of about ₹7,300–₹7,500 per gram (22 karat), 10 grams of gold is worth approximately ₹73,000–₹75,000. At RBI's maximum LTV of 75%, you can get a gold loan of about ₹54,750 to ₹56,250. Use the LTV tab in our calculator above to get the exact figure for your specific weight, purity, and gold price.

Which bank gives the cheapest gold loan in India? ▼

For the cheapest gold loan by interest rate, public sector banks are the clear winners. SBI Gold Loan starts at 8.75% p.a. (reducing), followed by Union Bank of India at 8.90% and Indian Bank at 9.00%. If you need speed and convenience more than the lowest rate, Muthoot Finance and Manappuram are excellent options but cost significantly more in interest. For medium amounts (₹1–10 lakh), banks offer the best value if you can wait 1–2 days for processing.

What is the maximum LTV for gold loans as per RBI? ▼

As per the Reserve Bank of India (RBI) guidelines, the maximum Loan-to-Value (LTV) ratio for gold loans is 75% of the value of the gold (including making charges). This applies to both banks and NBFCs. Some lenders may show higher LTV in advertisements, but 75% is the regulatory maximum. Always verify the LTV and method of gold valuation with your lender.

Can I foreclose my gold loan before tenure? Are there any charges? ▼

Most banks (SBI, HDFC, ICICI, Union Bank) allow zero prepayment / foreclosure charges on gold loans. Some NBFCs may charge 1–2% as a foreclosure fee if you close within the first few months. Always check this before signing the loan agreement. Prepaying your gold loan saves significant interest — use the prepayment option in our EMI calculator to see how much you save.

What documents are required for a gold loan? ▼

Gold loans require minimal documentation, which is one of their biggest advantages. You typically need: (1) Identity Proof — Aadhaar card, PAN card, Voter ID, or Passport; (2) Address Proof — Aadhaar, utility bill, or bank passbook; (3) Passport-size photos; (4) The gold itself — ornaments or coins (24K RBI-approved coins up to 50 grams). No income proof or CIBIL score is required in most cases, making gold loans accessible even to people with no formal income.

What happens if I default on my gold loan? ▼

If you miss EMIs or fail to repay your gold loan within the tenure, the lender has the legal right to auction your gold to recover the outstanding amount. Lenders typically send 2–3 demand notices before initiating auction. A penal interest of 1–3% extra per month is also charged on overdue amounts. If you are struggling to repay, contact your lender immediately to explore loan renewal, restructuring, or tenure extension — this is much better than an auction of your valuables.

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Disclaimer: This calculator is for informational and educational purposes only. Results are estimates based on inputs provided. Actual EMI, interest rates, and charges may vary by lender. Please verify with your bank or NBFC before making any financial decision. See our full disclaimer and terms and conditions.