Gold Loan vs Home Loan: LTV, Tenure and Tax Compared

A gold loan is a short-term loan against your jewellery. RBI caps it at 85% of the gold's value for consumption loans up to ₹2.5 lakh, 80% up to ₹5 lakh and 75% above that, and limits bullet-repayment gold loans to 12 months. A home loan runs up to 30 years against the house and, under the old tax regime, earns deductions under Sections 24(b) and 80C.

Gold loan vs home loan: comparison table

RBI rules on gold loans

RBI's Lending Against Gold and Silver Collateral Directions, 2025 (dated 6 June 2025, amended 29 September 2025) apply to commercial banks, co-operative banks and all NBFCs, including housing finance companies. Lenders had to comply by 1 April 2026. The rules borrowers should know:

• LTV: 85%, 80% or 75% of the gold's value depending on your total consumption gold loans, and it must be maintained for the life of the loan. For bullet loans, the LTV counts the total amount repayable at maturity, interest included.
• Valuation: only the gold content counts, not stones. The price used is the lower of the 30-day average closing price or the previous day's closing price for that purity, published by IBJA or a SEBI-regulated commodity exchange.
• Weight caps: pledged ornaments up to 1 kg of gold per borrower across all loans, and gold coins up to 50 grams.
• Tenure: bullet-repayment consumption loans up to 12 months. Renewal needs a formal request, a credit check, LTV within limits, and payment of accrued interest first.
• Return of gold: on the same day, and in any case within 7 working days of full repayment. If the delay is the lender's fault, it pays you ₹5,000 for each day of delay.
• Auction: notice to repay first; reserve price at least 90% of current value (85% after two failed auctions); any surplus refunded within 7 working days.

Worked example: gold loan limit

Say your jewellery's gold content is valued at ₹4,00,000. At 85%, the loan would be ₹3,40,000. That is above ₹2.5 lakh, so the 80% cap applies instead: the maximum is ₹3,20,000, which sits inside the ₹2.5–5 lakh band. If it is a bullet loan, ₹3,20,000 must cover principal plus interest due at maturity, so the cash you receive is lower. Because it is above ₹2.5 lakh, the lender must also assess your repayment capacity.

Home loan: tenure, LTV and tax benefits

RBI's LTV caps for housing loans are 90% for loans up to ₹30 lakh, 80% for ₹30–75 lakh and 75% above ₹75 lakh. HDFC Bank's maximum home-loan tenure is 30 years or till retirement, whichever is lower. Rates are mostly floating; SBI's home-loan rates start from 7.50% (effective 15 October 2026), with SBI's EBLR at 8.15%. See SBI home loan rates or compare lenders on Ambak's interest rate page.

Tax deductions on a home loan

From the Income Tax Department's e-filing help for AY 2026-27 (Income-tax Act, 1961):

• Section 24(b), interest: up to ₹2,00,000 a year for a self-occupied house under the old regime, for a loan taken on or after 1 April 1999, if purchase or construction is completed within 5 years. Under the new regime this deduction is not available for a self-occupied house; for a let-out house, interest is deductible, but the loss cannot be set off against other income or carried forward.
• Section 80C, principal: housing-loan principal counts toward the combined ₹1,50,000 limit for 80C, 80CCC and 80CCD(1). These are Income-tax Act, 1961 section numbers; the same limits continue under the Income-tax Act, 2025 from tax year 2026-27. Old regime only.

Worked example: home loan EMI and tax

A ₹40,00,000 home loan at 7.50% for 20 years has an EMI of about ₹32,224. In year one you pay about ₹2,96,957 as interest and ₹89,727 as principal. Under the old regime, for a self-occupied house, interest deduction is capped at ₹2,00,000, and the ₹89,727 principal fits within 80C if other 80C investments leave room. Check other amounts on the EMI calculator.

When a gold loan makes sense

• You need a small amount for a few months and expect a clear inflow to repay it.
• You have idle jewellery and want quick funds. RBI makes a detailed repayment-capacity assessment mandatory only when total gold loans exceed ₹2.5 lakh.
• You can repay within the term. RBI requires the LTV to stay within the cap for the whole loan, so check what your loan agreement says happens if the gold price falls.

When a home loan makes sense

• You are buying or building a house. The amount, tenure and LTV of a gold loan are not designed for a property purchase.
• You want EMIs spread over 15–30 years, plus 24(b) and 80C deductions under the old regime.
• You may prepay later: a floating-rate home loan to an individual, sanctioned on or after 1 January 2026, carries no pre-payment charge. Model it on the prepayment calculator.

Can you use both?

Yes, but keep them separate in your planning. The down payment on a home loan is 10%–25% of the property value given RBI's LTV caps. A gold loan for that gap adds a second repayment, often with a 12-month bullet structure, on top of your new EMI. The home lender will see it on your credit report when it assesses your repayment capacity.

For more on comparing home finance options, see rent vs buy, worked both ways.

Sources

RBI, Lending Against Gold and Silver Collateral Directions, 2025: https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=12859
RBI, Pre-payment Charges on Loans Directions, 2025: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12878
Income Tax Department, Salaried Individuals for AY 2026-27: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
HDFC Bank, Home Loans: https://homeloans.hdfc.bank.in/housing-loans/home-loans
State Bank of India, Home loan interest rates: https://sbi.bank.in/web/interest-rates/interest-rates/loan-schemes-interest-rates/home-loans-interest-rates-current