In India, many keep gold at home or in lockers, seeing it as financial security. Gold loans seem smart—quick cash, no credit score needed, and lower interest than personal loans. But experts warn of hidden risks.
In recent years, gold loans have nearly doubled. RBI data shows their value has crossed Rs 1.7 lakh crore, with record levels of jewellery being pledged.
Though simple, gold loans can slowly drain wealth. Repeated pledging and mounting interest often mean jewellery, trust, and emotional security are lost forever.
Many pay only the interest, ignoring the principal. By the loan’s end, they lack funds to recover gold. Renewals or fresh pledges follow—until interest equals the value of the gold itself.
For lenders, gold loans are almost risk-free. If repayment fails, jewellery is auctioned. Family heirlooms, wedding ornaments, and years of savings vanish with just one auction notice.
Using gold loans for recurring costs like school fees, groceries, or rent is dangerous. Small business owners pledging gold for stock or sales can also lose both business cash and jewellery if losses hit.
Not all gold loans are bad. For short-term needs—like medical emergencies or bridging money until an FD matures—they can be useful. The key is quick closure before interest piles up.
