A Detailed Look at Gold Loan Fees and Charges
May 01, 2025

Gold has always been a valuable asset in Indian households. It holds sentimental value, but it can also be a great financial resource during challenging times. One of the most common ways to leverage the value of gold is through a gold loan. However, before availing of such a loan, it's important to understand the fees and charges involved.
In this article, we will delve into the world of gold loan fees and charges.
A Quick Look at The Gold Loan Fees And Charges
It's important before we understand gold loan fees and charges to also note that all lenders might not levy all charges. The norms may differ across banks. In any case let's look at some of the loan costs involved.
1. Processing Fee
When you apply for a gold loan, the bank incurs certain administrative costs to process your application. These costs are covered by a processing fee charged by the bank. It a one-time upfront fee which is generally deducted from the loan amount at the time of disbursal. The processing fee varies across bank but is usually a percentage of the loan amount.
For example, if you apply for a gold loan of ₹1 lakh with a processing fee of 1%, the processing fee would amount to ₹1,000 + GST. The amount would get deducted from the loan amount at the time of disbursal.
2. Renewal Fees
Gold loan renewal allows you to extend the loan repayment period. This is beneficial for those facing short-term cash flow issues. The extension of the repayment tenure gives you more time to manage your finances. Banks generally charge gold loan renewal fees. For example, Ujjivan Small Finance Bank’s Gold Loan renewal fee is 0.25% of Loan Amount or Min 300/- + GST whichever is higher for Loan up to 3 Lacs, >3 Lacs Flat Rs. 500/- + GST.
3. Stamp Duty
Banks charge stamp duty for Gold Loans. Stamp duty charges vary as per state laws.
4. Valuation Charges
A gold loan valuation charge is a fee that lenders charge to assess the market value of the gold being used as collateral for a loan. The valuation charge is used to determine how much the lender will lend against the gold.
The valuation is based on several factors, including the weight of the gold, the demand and supply of gold, and the loan-to-value (LTV) ratio. Ujjivan charges ₹ 250/- +GST for loan up to ₹3 lakh and ₹ 500/- +GST for loan more than ₹3 lakh.
5. Prepayment or Pre-closure Charges
If you decide to repay your gold loan before the designated tenure, you may incur gold loan pre-closure charges. Prepayment charges are levied to compensate for potential loss of interest income due to early repayment. Ujjivan charges 1% gold loan pre-closure fee on the outstanding principal provided the loan is closed after one month from the date of disbursement.
6. Late Payment Charges
Failure to repay your gold loan on time can attract late payment charges. These charges are imposed as a penalty for delayed repayment and can vary depending on the bank’s policies. Late payment charges are usually calculated as a percentage of the overdue amount or as a fixed fee per day of delay. For example, Ujjivan charges 2.5% +GST per month on overdue amount. Applicable on EMI Scheme/ Monthly Interest Scheme/ Bullet Scheme).
7. Cheque/SI/NACH bounce charges
A bounced cheque or if your standing instruction for auto-debit (exclusively for EMI payment) fails, banks would levy a penalty fee. For example, Ujjivan charges ₹500 + GST for bounced cheque, SI (standing Instruction) or NACH.
9. Legal/ Sarfaesi/ Incidental Charges
The SARFAESI Act of 2002 was created to help banks and financial institutions manage loans and money problems. It includes rules for recovering money from people who don't pay their loans.
10. Auction Notice Charges
Any missed EMI payment may prompt the bank to send gold auction notice. Banks hold the right to auction the pledged gold if the borrower defaults on gold loan. This is dome to recover the amount. Banks charge a certain fee for sending auction notice. The auction notice charge levied by Ujjivan is ₹500 + GST.
Final Thoughts
Understanding the fees and charges associated with gold loans is crucial to make informed borrowing decisions.
Get Gold Loans up to ₹25 lakh at attractive interest rates with Ujjivan Small Finance Bank. Enjoy quick disbursal and a stress-free loan journey. Apply now!
FAQs
1. Are there any hidden charges in a gold loan?
While all fees and charges should be clearly mentioned in the loan agreement, it's always important to read the terms and conditions carefully to avoid any surprises. However, if you choose a reputable lender, you can trust that there won't be any hidden charges.
2. How can I minimise the loan costs when availing a gold loan?
To minimise gold loan costs, compare different lenders, check for hidden charges, negotiate processing fees, and ensure timely repayment.
3. What are the common gold loan fees and charges?
Common gold loan fees and charges include processing fee, valuation charges, documentation charges, and prepayment charges.
4. What happens if I fail to repay my gold loan on time?
If you fail to repay your gold loan on time, you may incur penalty charges or additional interest.
5. What is the typical processing fee for a gold loan?
The processing fee for a gold loan can vary from lender to lender but is usually around 0.5% to 2% of the loan amount.
6. How would I know of any hidden costs in total gold loan costs?
The only way you would know of any hidden costs in total gold loan costs is having a straightforward discussion with your lender. Ujjivan Small Finance Bank is transparent regarding the fees and charges associated with loans.
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