Need cash urgently but don't want to sell your family gold? Here is how gold-backed loans work in the local market.
The Concept of Gold Backed Loans
Many commercial banks and specialized microfinance institutions in Pakistan offer loans against physical gold. Instead of selling your heirloom bridal sets, you deposit them in a bank vault as collateral and receive a cash loan (usually up to 70% of the gold's market value).
The Advantages
The primary advantage is speed. Because the collateral is highly liquid and easily verifiable, gold loans are processed in hours, not weeks. Furthermore, you retain ownership of your assets. Once you repay the loan and interest, you get your exact jewelry back.
The Risks
If you fail to make your interest payments, the bank has the legal right to auction your gold to recover their funds. Always ensure you have a solid repayment plan before taking leverage against family heirlooms.