Bank Gold Loan Vs NBFC Gold Loan
By Team CodeForBanks | July 02, 2025
Gold loans are usually borrowed to pay for expenses, grow a business, or handle an emergency. It lets you use your gold jewelry to get the loan without having sell off the same. Gold loans are mainly borrowed either from banks or from NBFCs. However, you need to choose one of the two lenders, based on your specific requirements.
Gold Loan – What is it?
Gold loan involves taking money in exchange for one's gold assets like jewelry and coins. The more gold you exchange, the more amount you can borrow as loan. The lender weighs the gold and chooses the amount based on the purity of the gold. Once the loan is repaid, you get back all the gold you had handed over to the lender.
Gold loan is a much simpler way to get funds for emergencies.
Gold Loan - NBFC vs Bank
Here's a table to brief you about the differences before you study them separately:
| Particulars | NBFCs | Banks |
|---|---|---|
| Amount of loan | Usually higher amounts can be borrowed | Usually lower, and depend on the gold's value |
| Documents needed | Less documents are required to get approval | More documents are required to prove creditworthiness |
| Processing time | With less documentation and less regulation, processing is fast, usually 1-2 hours | Requires 2-3 days |
| Rate of interest charged | Usually they are higher, around 10-12% per annum | Lower interest rates, 7-8% a year |
| Repayment | Repayment terms are more flexible, but have short tenure | Tenures are longer, up to 3 years |
| Security standards | They are secure, with differing safety levels | There is variation in safety standards, but banks are most secured with insured vaults |
Let us study both, first starting with gold loans from NBFCs.
NBFC Gold Loan – Borrowing Gold Loan from NBFCs
Non-Banking Financial Companies or NBFCs are more flexible than banks in terms of gold loans. Though, there are pros and cons of borrowing a gold loan from an NBFC as well. It may be noted that the NBFCs are also governed by India's central bank, the RBI or Reserve Bank of India. However, the rules are not strict as in case of banks.
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Advantages of NBFC Gold Loans
When you are planning to get a gold loan from an NBFC, you will get to enjoy perks like fast processing, less documentation and increased flexibility, especially when compared to that from banks. The terms are not too strict, because of which documents required are not too many and the processing time is low. You can get higher amounts of loan by just showing some basic identification documents. Repayment terms are adjustable as per the cash flow of your business.
Nonetheless, there are drawbacks attached.
Disadvantages of NBFC Gold Loans
As said, the NBFCs are not under too strict regulation. While this may seem good in the very beginning, it may also appear little less secure when investing your gold there. NBFCs may not allow long repayment periods, this may burden you with loan repayment amounts, especially when you are already short of funds. Lastly, the rates of interest charged are higher than that with banks.
Bank Gold Loan – Borrowing Gold Loan from Banks
Banks stand as the most traditional form of financial institutions offering several types of services. They offer loans, including gold loans. Because they are most traditional, they are also relied on the most. That's also due to the reason that they are governed by the government.
If you are planning to borrow a gold loan from a bank, here are some points to note:
Advantages of Bank Gold Loans
Banks are known to levy a lower interest rate on gold loans. They are hence more affordable. As discussed, banks carry the highest amount of trust of the public. They are safer than other financial institutions. Choosing banks that are public and highly-reputed further enhance you chances of approval and successful loan borrow and repayment. Not just this, but banks also let you repay the amount over a long period, thus reducing your burden in the coming days.
Disadvantages of Bank Gold Loans
The drawbacks of acquiring gold loans from banks include a long processing time. A lot of eligibility criteria is to be followed and several documents are needed for approval and processing. It takes time to get the money in hand. Hence, they may not suit those in urgency. Moreover, there is also less flexibility offered by banks in terms of loan terms and conditions.
Choosing Between NBFCs and Banks for Gold Loans
The choice is all about your needs. If you want funds instantly, NBFCs are a better option. The amount of loan taken with an NBFC, when not very big, is a suitable option. It is also appropriate when you do not mind paying a slightly higher interest rate. Conversely, choose one of the banks when the loan amount required is quite high and you need tough security for the gold you give for the time being. It is also okay to choose to get a gold loan from bank, when you can wait a few days for the approval and processing.
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