Does Gold Loan Affect CIBIL Score

Gold loans, also known as loans against gold, are a popular form of secured lending where individuals can borrow money by pledging their gold jewelry or ornaments as collateral. 

In this article, we will explore the relationship between gold loans and CIBIL scores and shed light on how gold loans can impact an individual's creditworthiness.

How Does Gold Loan Impact My CIBIL Score?

In the case of gold loans, the primary factor affecting the CIBIL score is the timely repayment of the loan. When you take a gold loan, the lender reports the loan details, including payment history, to credit bureaus such as CIBIL. 

If you consistently make timely repayments without any defaults or late payments, it can have a positive impact on your credit score. 

Regular and timely repayments indicate responsible financial behavior and can contribute to building a positive credit history.

What Happens If I Miss My Gold Loan Repayments?

If you fail to repay the gold loan per the agreed terms and conditions, it can negatively affect your credit score. Instances of default or late payments are reported to credit bureaus, resulting in a drop in the individual's credit score. 

Such negative remarks on the credit report can stay on record for a significant period and may affect your ability to access credit in the future.

Things To Remember Before Taking A Gold Loan

When considering taking a gold loan, it is essential to make an informed decision to ensure that it aligns with your financial needs and goals. Here are some key factors to consider:

Loan-to-Value Ratio (LTV)

The loan-to-value ratio determines the maximum loan amount you can avail against the value of your gold assets. Different lenders offer varying LTV ratios. Higher LTV ratios may result in a larger loan amount but could also mean higher interest rates. 

Gold Valuation

Understand the process used by the lender to evaluate the value of your gold assets. Gold valuation methods vary, and lenders consider several factors such as purity, weight, and current market rates. 

Ensure that the lender follows transparent and reliable valuation practices to ensure a fair assessment of your gold assets.

Interest Rate

Since gold loans are secured loans, the interest rates will be lower as compared to unsecured loans such as personal loans.

Compare the interest rates offered by various lenders as they vary depending on the lender, loan amount, loan tenure, and other factors. 

Understand the applicable interest rate, whether it is fixed or floating, and if there are any additional charges or processing fees.

Loan Tenure

Choose a tenure that suits your financial goals by evaluating the loan tenure options available to you. Shorter tenures result in higher EMIs but help you save on interest payments while longer tenures offer lower EMIs but result in higher interest payments over time. 

Prepayment and Foreclosure

Clarify the terms and conditions related to prepayment and foreclosure of the gold loan. Check if there are any prepayment charges or penalties for repaying the loan before the agreed-upon tenure. 

The Credibility of the Lender

Evaluate their credibility and choose a reliable lender before proceeding with a gold loan. Consider factors such as customer reviews, customer service quality, and the lender's overall standing in the market.


Gold loans can affect an individual's CIBIL score. Timely repayment of the loan can have a positive impact, while defaults or late payments can lead to a decline in credit score. Responsible borrowing, regardless of the type of loan, is crucial for maintaining a healthy credit history. 

Cibil Score Related FAQs

Yes. Since a gold loan is a form of credit, it will impact your credit score.

No. Gold loan is extended to the borrower when they pledge their jewelry. Hence it is a secured loan.

The lender will sell or auction off the gold you have pledged to recover the amount you have defaulted on. Additionally, your credit score will drop, making it harder for you to get credit in the future.

Timely repayment of your loan amount will help you increase your CIBIL score. However, it will take some time to see a significant increase in your score. 

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