Loan on Gold in Pakistan – How It Works and Where to Apply

Introduction

Imagine facing a medical emergency, a sudden business opportunity, or urgent home repairs. You need funds quickly, but banks demand lengthy paperwork and collateral you might not have. What if the solution is already in your jewelry box? A Loan on Gold in Pakistan offers a lifeline by turning your idle gold into immediate cash. This comprehensive guide explains exactly how it works, where to get the best deals, and how to avoid pitfalls.

In this comprehension guide, we’ll explore step-by-step how a loan against gold in Pakistan works, which banks to consider, eligibility criteria, real-life examples, and tips for a smooth experience.

Useful Tip: Before heading to the bank, check the daily gold rate on a reliable source like Dawn’s Gold Rate Updates. This ensures you understand the approximate value of your jewelry.

What Exactly is a Gold Loan (Sona Qarza)?

A loan against gold in Pakistan is a secured loan where you pledge physical gold items (jewelry, coins, bars) to a bank or financial institution as collateral. Unlike personal loans, your credit history isn’t the main factor. Instead, the loan amount depends on your gold’s purity and market value. You retain ownership while using the gold and get it back upon full repayment.

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Key Benefits of loan on Gold in Pakistan

• Quick Disbursement: Funds in hours, not weeks.
• Minimal Documentation: Basic ID and gold items suffice.
• No Credit Checks: Ideal for those with low credit scores.
• Flexible Repayment: Options range from 3 months to 3 years.

Tip: Always clean your gold items before appraisal! Dirt or stones can lower valuation. Remove non-gold elements like gems or enamel.

How Does a Loan Against Gold in Pakistan Work?

A loan against gold in Pakistan works on a straightforward principle: pledge gold as collateral, get assessed, and receive a loan. Here’s the process in simple steps:

1. Bring Your Gold to the Bank or Microfinance Institution
   Most banks and a few microfinance organizations have dedicated gold valuation teams. They inspect your gold for purity (usually 22K or 24K), weigh it, and calculate its current market value.
2. Valuation and LTV (Loan-to-Value) Ratio
   After weighing and purity check, the lender determines the Loan-to-Value ratio (LTV). In Pakistan, LTV for gold loans generally ranges from 60% to 75%. For example, if 50 grams of 22K gold is valued at PKR 800,000, you could get up to PKR 600,000 (75% LTV).
3. Documentation
   Required documents include:
   • Copy of CNIC (National Identity Card)
   • Proof of residence (utility bill, rent agreement, etc.)
   • Photos (in some cases)
   • Gold (jewelry or coins) signed over to the bank
4. Loan Agreement and Disbursal
   Once documents are verified and the gold is accepted, you sign a loan agreement. Funds are usually disbursed within 24–48 hours, either in cash, through a pay order, or into a bank account.
5. Repayment
   Gold loan tenures in Pakistan range from 3 to 12 months, sometimes extendable to 24 months. Repayment modes include monthly installments (EMIs), bullet payments (one-time at maturity), or an overdraft facility in some banks.

Example: If Mr. Ali from Karachi pledges 40 grams of 22K gold (valued at PKR 640,000), and the bank offers 70% LTV, he will receive PKR 448,000. He can choose a 6-month tenure at an interest rate of 14% per annum, paying approximately PKR 80,960 as interest over six months, plus the principal at maturity if he opted for a bullet repayment.

Useful Tip: If you live in a smaller city or town, ask the bank if they provide van/mobile services where a representative comes to your home for quick gold valuation. This saves time and ensures safety.

Why Opt for a Bank Loan on Gold Instead of Selling Jewelry?

1. Emotional and Sentimental Value
   Many families inherit gold jewelry passed down for generations. Selling these sentimental items may not sit well emotionally. A loan on gold in Pakistan lets you keep ownership. Once you repay, you get the jewelry back.
2. Lower Interest Rates
   Gold loans often carry interest rates between 12% and 18% per annum, far lower than unsecured personal loan rates (which can go up to 20%–24% for salaried individuals). This makes a gold loan in Pakistan more economical.
3. No Credit History Required
   For those without documented income—small traders, artisans, or daily-wage labourers—a standard bank loan may be out of reach. With a gold loan bank, you simply present gold as collateral; the bank does not require a credit score check.
4. Quick Disbursal vs. Personal Loans
5. While a personal loan might take 7–10 days for processing, a loan on gold in Pakistan can be approved and disbursed within 48 hours. If time is of the essence—for example, a sudden medical expense—gold loans win.

Example: Mrs. Fatima in Peshawar needed PKR 200,000 for her son’s surgery. Selling her late mother’s gold necklace felt heartbreaking. Instead, she approached a local gold loan bank, pledged the necklace, and got the required amount within a day. She repaid the loan over eight months, reclaiming the necklace afterward.

Comparison of Top Gold Loan Providers in Pakistan

Below is a table comparing some leading gold loan Pakistan providers as of mid-2025. Note: Interest rates and processing charges are illustrative; always confirm with the bank before applying.

Useful Tip: If you prefer Shariah-compliant financing, consider MCB Islamic Bank or Meezan Bank. Ask for their latest profit-sharing rates (often called “Murabaha” or “Musharaka”).

Eligibility Criteria: Who Can Apply for a Gold Loan in Pakistan?

Almost anyone who owns gold jewelry or coins can apply for a gold loan in Pakistan. However, banks still have basic eligibility requirements:

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• Age: Applicant must be 18 years or older (some banks accept 16+ for minors with a guarantor).
• Nationality: Must be a Pakistani national with a valid CNIC.
• Gold Ownership: Applicant must own the gold being pledged. Banks sometimes ask for a “purity certificate,” but most rely on their in-house assayers.
• Residency Proof: A utility bill (no older than 3 months) or rent agreement.Income Proof: Usually not required for loans up to PKR 500,000. For higher amounts, some banks may ask for salary slips or bank statements.

Example: Mr. Imran, a daily-wage worker in Multan, needed PKR 100,000 for his daughter’s marriage. He visited a microfinance institution that offered loan against gold in Pakistan without requiring proof of income, simply presenting his CNIC and utility bill to apply for loan on gold.

Documentation Checklist

When you decide to apply, have the following ready:

1. Original Gold Jewelry or Coins
2. Identification
   • CNIC copy (front and back)
   • Recent passport-size photographs (2–3)
3. Proof of Residence
   • Utility bill (electricity, gas, water) not older than 3 months
   • Rent agreement (if applicable)
4. Additional as Required
   • Guarantor’s CNIC (for higher amounts or minors)
5. Bank account details (if disbursal via transfer)

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Useful Tip: Always ask the bank if they charge a separate “gold purity test” fee. Some small microfinance institutions may charge an extra PKR 200–500 for assaying, while major banks include this in processing fees.

Understanding Costs: Interest, Processing, and Hidden Charges

While a gold loan Pakistan looks straightforward, it is vital to understand all applicable charges:

• Interest/Profit Rate: Ranges from 12% to 18% per annum in conventional banks. Islamic banks offer profit rates (often called “markup”) or use Murabaha models where markup is agreed upfront.
• Processing Fee: Usually 0.5% to 1.5% of the loan amount. For example, if you take PKR 500,000, you might pay PKR 5,000 to PKR 7,500 as a processing fee.
• Appraisal/Valuation Fee: Some microfinance institutions charge PKR 200–500 for gold testing; many large banks include it in the processing fee.
• Storage Charges (if any): While most banks store gold free of charge in secure lockers, some may charge nominal insurance or handling fees under specific circumstances.
• Early Settlement Charges: If you repay before the agreed tenure, some banks charge 1%–2% of the outstanding amount as a penalty.

It is crucial to ask for a detailed “Schedule of Charges” before you sign the agreement. Some microfinance banks publish these on their websites, such as Khushhali Bank’s Schedule.

Step-by-Step Example of a Gold Loan Transaction

To illustrate, consider a scenario:

1. Valuation
   Mrs. Sara from Islamabad brings 30 grams of 22K gold to NBP. The current “spot price” (market rate) is PKR 1,600 per gram. The bank’s in-house assayer confirms the quality and weighs it, valuing it at PKR 48,000 (30g × PKR 1,600).
2. Loan Offer
   NBP offers an LTV of 70%. So, maximum loan amount = 70% × PKR 48,000 = PKR 33,600. However, NBP’s minimum loan amount is PKR 50,000—so they likely round up or ask for an additional 10 grams. If Sara brings an extra 10 grams, total value = 40g × PKR 1,600 = PKR 64,000; LTV 70% ⇒ loan = PKR 44,800.
3. Documentation and Disbursal
   After submitting CNIC, proof of address, and photos, Sara signs the agreement. NBP deducts a 1% processing fee (PKR 448). Net disbursed amount = PKR 44,352. Funds transferred to her bank account within 48 hours.
4. Repayment Plan
5. Sara opts for an 8-month tenure at 13% per annum. Total interest = 13% × PKR 44,800 × (8/12) ≈ PKR 3,885. Monthly EMI ≈ (44,800 + 3,885) ÷ 8 ≈ PKR 6,090. After 8 months, she pays the final EMI and collects her gold.

Comparing Conventional vs. Islamic Gold Loans

Feature	Conventional Gold Loan	Islamic Gold Loan
Interest/Profit	Charged as per interest rate (p.a.)	Profit-sharing or markup (Murabaha); no Riba (interest)
Profit Rate Range	12%–18% (p.a.)	0%–3% markup over bank’s base rate (depends on model)
Documentation	Simple (CNIC, Proof of Address)	Similar; sometimes additional Shariah compliance forms
Tenure	3–12 months (extendable)	3–12 months (extendable)
Processing Speed	24–48 hours	48–72 hours
Storage Charges	Usually none	Usually none
Ideal For	Anyone needing fast cash at low cost	Those wanting Shariah-compliant financing

Useful Tip: If you want no interest, look for “Murabaha” or “Musharaka” gold financing. Banks like MCB Islamic Bank and Meezan Bank publish their profit rates monthly.

Where to Apply: Best Gold Loan Bank Options

Below is a closer look at some top gold loan banks and institutions in Pakistan. Click the links to visit their official gold loan pages.

1. National Bank of Pakistan (NBP)

• Product: NBP Gold Loan
• Loan Range: PKR 50,000 to PKR 2,000,000
• Interest Rate: ~13% per annum Reuters
• Tenure: 3–12 months (extendable to 18 months with penalty)
• Processing Time: 24–48 hours
• Key Feature: Government-owned, wide branch network, typically fastest disbursal
• Learn More: NBP Gold Loan Details

2. Bank Alfalah

• Product: Gold Loan Scheme
• Loan Range: PKR 25,000 to PKR 1,500,000
• Interest Rate: Fixed 14% per annum ubank.com.pk
• Tenure: 6–12 months
• Processing Time: 24 hours
• Key Feature: Minimal documentation, no income proof up to PKR 1 million

Learn More:Bank Alfalah Gold Loan

3. United Bank Limited (UBL)

• Product: UBL Gold Loan
• Loan Range: Varies by valuation (min PKR 50,000)
• Interest Rate: 12%–15% per annum (depending on LTV)
• Tenure: 3–12 months
• Processing Time: 24–48 hours
• Key Feature: Option for bullet repayment or EMI, flexible LTV
• Learn More: UBL Gold Loan

4. MCB Islamic Bank

• Product: Shariah-Compliant Gold Finance (Murabaha)
• Loan Range: Based on gold value; no minimum fixed amount
• Profit Rate: 0% markup + 2% administrative fee (varies) Financial TimesTrading Economics
• Tenure: 3–12 months
• Processing Time: 48 hours
• Key Feature: No Riba, profit-sharing, target market includes conservative savers
• Learn More: MCB Islamic Gold Finance

5. Meezan Bank

• Product: Gold Finance (Shariah-Compliant)
• Loan Range: Based on valuation (min PKR 25,000)
• Profit Rate: Market-based, usually 1%–2.5% above Meezan base rate
• Tenure: Flexible (3–12 months)
• Processing Time: 48 hours
• Key Feature: Fully Islamic, wide branch network
• Learn More: Meezan Bank Gold Finance

6. Khushhali Microfinance Bank

• Product: Khushhali Gold Loan
• Loan Range: Up to PKR 500,000
• Interest Rate: 16%–18% per annum
• Tenure: 6–12 months
• Processing Time: 48–72 hours
• Key Feature: Branches in rural areas, lower amounts for lower-income clients

Learn More: Khushhali Gold Loan Schedule

Useful Tip: Compare not only interest rates but also processing fees, appraisal charges, and storage policies before finalizing any bank. Ask for a “Breakup of Charges” (Schedule of Charges) in writing.

Factors to Consider Before Taking a Gold Loan

1. Loan-to-Value (LTV) Ratio

Different banks offer different LTV ratios. While some might offer 75% LTV, others cap at 60%. If you need more cash, choose a bank with a higher LTV.

2. Interest/Profit Rate

Small differences in percentage can mean thousands of rupees over the loan tenure. If you borrow PKR 500,000 for 12 months at 12% vs. 14%, your interest cost differs by PKR 10,000.

3. Processing and Hidden Charges

Ask about:

• Appraisal fee (gold purity test)
• Processing fee (percentage of loan)
• Safe custody/storage charges (if any)
• Early settlement penalty (1%–2% of outstanding)

4. Repayment Flexibility

Some banks allow monthly EMIs, while others mandate bullet payment. Monthly EMIs are easier to budget for low-income families. Bullet payment requires you to pay the entire principal plus interest at maturity.

5. Storage and Security

Ensure the bank uses secure vaults with CCTV, armed guards, and insurance for pledged gold. If possible, visit the bank vault to see their security measures.

6. Bank Reputation and Branch Network

If you intend to extend your loan or face any issues, a bank with a wider branch network—like NBP or UBL—makes follow-up easier. For rural clients, microfinance banks might be more convenient.

Roadmap to Applying for a Gold Loan in Pakistan

1. Research & Shortlist

• Compare interest/profit rates online via bank websites or trusted portals.
• Check for up-to-date “Gold Rate Pakistan Today” before valuation.

2. Visit Branch or Mobile Unit

• Bring gold ornaments/coins cleaned and separated by weight.
• Carry CNIC, recent utility bill, and photos.

3. Valuation & Quote

• Bank assayer tests purity and weighs gold.
• You get a written quote: gold value, LTV, processing charges, interest rate, and tenure.

4. Review Terms & Conditions

• Read loan agreement carefully—especially about early settlement, extension, and grace period.
• Ask for a clear breakdown of all fees in writing.

5. Sign Agreement & Receive Funds

• Sign in the presence of bank officer.
• Receive funds in cash or through bank transfer.

6. Repayment & Gold Redemption

• Stick to EMI schedule or bullet payment as agreed.
• After full repayment, collect original gold within a week.

Tip: Compare total repayment cost (interest + fees), not just interest rates.

5 Risks & How to Mitigate Them

1. Gold Price Fluctuations

If gold prices crash, banks may ask for additional collateral.

Fix: Opt for shorter tenures to reduce exposure.

2. Auction Risk

Defaulting leads to gold auction.

Fix: Set automatic reminders for installment dates.

3. Purity Disputes

Banks may downgrade karat purity.

Fix: Get an independent appraisal first.

4. Storage Safety

Ensure the bank has insured vaults.

5. Hidden Fees

Clarify all charges in writing.

Tip: Photograph your gold items with dated newspapers before submission as proof of condition.

Gold Loan Alternatives in Pakistan

• Personal Loans: Higher rates (25%–35%) but no collateral.
• Credit Cards: Cash advances at 30%+ interest.
• Informal Lenders (Arthis): Quick but risky (50%–100% interest).
• Government Programs: Ehsaas loans (0% interest for marginalized groups).

Common Misconceptions about Gold Loan

1. “Gold Loans Are Only for the Rich.”

Not true. Even if you have just one gram of 22K gold, some microfinance institutions let you borrow as little as PKR 5,000–10,000.

2. “Banks Underpay for Gold.”

While some lenders apply a small deduction for processing, most reputable banks base valuation on daily market rates. Always verify gold rate and ask for weight slip.

3. “Early Repayment Is Expensive.”

Some banks charge a 1% early settlement fee, but this is often negligible compared to long-term interest savings. If you can repay early, you save thousands in cost.

4. “All Gold Loans Are Interest-Free.”

Only Shariah-compliant gold financing (Murabaha) offers no interest. Conventional banks charge interest. Always clarify which model your lender uses.

Frequently Asked Questions (FAQs)

Real-Life Experience: A Borrower’s Perspective

Case Study: Mr. Raza from Faisalabad

• Need: PKR 150,000 for daughter’s university admission
• Gold Pledged: 20 grams of 22K gold designed as rings and bangles
• Bank Chosen: UBL (due to proximity and slightly lower interest)

Process Raza Went Through:

1. Raza arrived with his CNIC and utility bill on a Monday morning.
2. UBL’s valuation team tested gold purity and weighed it at 20 g × PKR 1,650 = PKR 33,000.
3. LTV 70% ⇒ loan offered PKR 23,100. But UBL’s minimum was PKR 50,000, so he needed 12 more grams.
4. After adding 12 grams, total value was PKR 52,560; LTV 70% ⇒ PKR 36,792.
5. He took a 9-month EMI plan at 13.5% p.a. monthly EMI ~ PKR 4,600.
6. Funds were transferred by Wednesday. He paid on time every month and retrieved his gold after 9 months.

Lessons for loan Seekers:

• Always verify daily gold rate before visiting.
• Confirm minimum loan amount with bank to avoid multiple trips.
• Keep proof of Pledge Receipt and loan agreement copy safe.

Useful Tip: Always pay EMIs on time. Banks may liquidate pledged gold at a discounted rate if payments are overdue beyond grace period (often 15 days).

Conclusion: Is a Loan on Gold in Pakistan Right for You?

A loan on gold in Pakistan is an effective solution when you need quick access to cash without losing ownership of your cherished jewelry. Whether you face an emergency, want to start or expand a business, or need funds for education, gold loans offer:

• Quick Disbursal: Funds within 24–48 hours
• Low Documentation: Just CNIC, proof of address, and gold
• Competitive Rates: 12%–18% p.a. for conventional, 0% markup for Islamic models
• Flexible Tenure: 3–12 months, extendable in most banks

However, always compare banks on interest/profit rates, processing fees, hidden charges, LTV ratios, and repayment flexibility. A well-informed decision saves money, time, and stress. Remember:

1. Check Daily Gold Rates: Visit sites like Dawn – Business or SBP.
2. Compare Multiple Banks: Don’t settle for the first quote. Ask at least three banks or institutions.
3. Read Fine Print: Early settlement, storage charges, appraisal fees, and penalty clauses matter.
4. Choose Shariah-Compliant if Needed: If you avoid Riba, go for Islamic gold financing through MCB or Meezan Bank.

By taking these steps, you’ll secure a bank loan on gold that fits your needs and budget. In a country where gold is deeply valued, turning it into quick cash—without parting with it forever—is a smart choice. Make sure you understand every clause and take advantage of the financial tool that gold loans represent.

Author’s Note:

This article aims to provide clear, practical guidance for anyone in Pakistan considering a loan on gold. Always consult your bank’s representative or a financial advisor for personalized advice tailored to your specific situation. Good luck!