Can You Get a Gold Loan despite a Low Credit Score?


  • Gold Loans are less dependent on your Credit Score
  • They may help improve your Credit Score

Getting a Personal Loan is highly dependent upon on your Credit Score. So, if your Personal Loan application has been rejected due to a low score (below 700), don’t keep applying for a Personal Loan repeatedly with different banks (as this may further reduce your score due to different Banks conducting Hard Inquiries on your CIBIL). Don’t lose hope. A Gold Loan may come to your rescue.

Good Credit Scores are not critical for Gold Loans

RBI has made it mandatory for banks to do a CIBIL score check before giving out any loans to customers. Personal Loans, being unsecured loans, are more risky for a bank. A good CIBIL Score, among other factors, gives the bank more confidence in your repaying ability. Hence the success of your PL application requires a good score.

Gold Loans, on the other hand, require you to provide a fairly liquid tangible asset, ie, Gold, as collateral. Banks are more likely to give you a loan, despite your less than desirable credit score, because your Gold asset acts as the security and shields them from the risk of default.

Thus Gold Loans may be a good option during a dire need, when Personal Loans are not viable for you.

Gold Loans may help improve your CIBIL Score

Gold Loans carry several advantages like attractive interest rates, flexibility, availability. But one really stands out – it can help you improve your CIBIL score and may unlock options for other loans in the future.

Keep the following tips in mind after taking the Gold Loan:

Repay on Time: Make sure you pay your EMIs (Equated Monthly Installments) on, or if possible, before the due date. Timely payment of EMIs will start having a positive effect on your Score. Stay disciplined and over time you will end up with a good CIBIL Score and a lot more open doors.

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Avoid Collateral Auction: This is a strict no-no. While some lenders may be lenient and might not pull you up due to one or two late EMI payments – it WILL negatively affect your Score, and put your Gold at risk. Stretch your finances, but don’t fail to pay at all costs.

Please remember, that while Gold Loans may be easier to procure, you would be putting your precious assets at stake, for the duration of the loan – which may be fine as an emergency measure, but not desirable in the long term. Actively look to improve your score and move to an unsecured loan if necessary, as soon as the opportunity arises.

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