What is a gold loan balance transfer and how does it work?

A gold loan is a secured loan in which gold jewellery or bullion is used as collateral by the applicant borrowing money. Some Non-banking Financial Companies (NBFCs) and other types of lending institutions offer the facility of gold loan balance transfer, enabling an existing borrower to transfer their outstanding gold loan amount from one NBFC to another.

The key objective is to help applicants reduce interest costs by transferring their gold loan to a provider offering lower rates. It allows the applicant to retain the same quantity of gold pledged while paying off the previous loan provider and continuing the loan at more favourable terms with the new provider. The process typically involves submitting Know Your Customer (KYC) documents, current loan details and gold valuation certificates to the NBFC, where a balance transfer is sought.

Eligibility criteria can vary across loan providers. Factors like credit score, loan-to-value ratio, tenure, documentation, etc., may be assessed before approving balance transfer requests. Some may charge a nominal balance transfer fee as well. Applicants may also potentially opt for a top-up loan while availing of the transfer facility.