When personal or business cash flow halts and standard clean lending is restricted by tight Debt Burden Ratio (DBR) limits or lack of formal salary slips, pledging gold jewelry offers a rapid, collateral-backed path to liquidity. Because physical gold provides immediate tangible security, commercial banks process these facilities with minimal income scrutiny, no property registry delays, and lower mark-up rates than unsecured personal loans.
In Pakistan, United Bank Limited (UBL) and Allied Bank Limited (ABL) manage two of the most structured retail gold loan programs: UBL Ameen / Conventional Gold Financing and Allied Bank (ABL) Gold Loan / Zarzamin Finance.
Below is a direct comparison of their loan-to-value (LTV) limits, gold purity standards, appraisal fees, repayment models, and default auction rules.
Comparison: UBL vs. Allied Bank Gold Loans
| Feature | UBL Gold Financing | Allied Bank (ABL) Gold Loan |
| Product Framework | Conventional & Islamic (Ameen) | Conventional & Islamic (Tahir) |
| Minimum Loan Limit | PKR 50,000 | PKR 50,000 |
| Maximum Loan Limit | Up to PKR 5,000,000 (or SBP clean/asset cap) | Up to PKR 10,000,000 (subject to branch tier) |
| Loan-to-Value (LTV) | Up to 70% to 75% of net gold market value | Up to 70% to 75% of net gold market value |
| Eligible Gold Purity | 20K, 21K, and 22K purity | 20K, 21K, and 22K purity (Strictly no 18K/white gold) |
| Tenure | 1 Year (12 Months) (Renewable upon interest payment) | 1 Year to 3 Years (Revolving or bullet repayment) |
| Repayment Structure | Running Finance (markup quarterly, principal at maturity) | Bullet repayment or monthly markup installments |
| Markup Rate | Variable: 1-Year KIBOR + ~3.50% to 4.50% | Variable: 1-Year KIBOR + ~3.50% to 5.00% |
How Loan-to-Value (LTV) and Appraisals Work
Banks do not calculate your loan based on the gross weight of your jewelry or retail jeweler prices (which bundle making charges and precious stones):
- Net Gold Weight Extraction: The bank’s certified on-site assayer (Goldsmith / Sonara) weighs the pieces and deducts the exact weight of all beads, synthetic stones, enamel, and base metal attachments.
- Karat Purity Assessment: The assayer tests the metal using nitric acid touchstones or computerized XRF analyzers to confirm 20K, 21K, or 22K purity. 18-karat gold and below are strictly rejected across all commercial banks.
- Valuation Formula:$$\text{Maximum Eligible Credit} = \text{Net Pure Gold Weight (Grams)} \times \text{Prevailing 24K SBP/APGJEA Spot Rate} \times \text{LTV Ratio (70\%)}$$
- Appraiser Fee: A nominal appraisal fee (typically PKR 2,000 to PKR 5,000, or actual assayer rates) is charged directly to the borrower at testing.
Storage, Safety, and Custodial Insurance
A primary concern for borrowers is the safety of family jewelry deposited with a financial institution:
- Dual-Custody Vaulting: Pledged jewelry is sealed in tamper-evident, numbered bags in your presence, signed by you, the branch manager, and the vault officer.
- Fire & Theft Insurance: Commercial banks hold comprehensive institutional vault insurance covering 100% of the replacement market value of pledged gold against robbery, burglary, or fire incidents.
- Return of Original Articles: Upon full repayment of the principal and accrued markup, the identical numbered seal is inspected and broken in your presence, returning the gold in its exact initial state.
What Happens in Market Crashes or Payment Defaults?
Because domestic gold prices fluctuate continuously, gold financing agreements include strict margin-call covenants:
- Margin Call (Price Drop): If international or local gold prices plunge and your outstanding loan balance breaches the 75% LTV buffer (reaching 80% to 85% of market value), the bank issues an immediate Margin Call Notice. You must either deposit cash to reduce the principal or hand over additional gold ornaments within 7 to 14 days.
- Grace Period & Auction: If the loan matures after 12 months without settlement or renewal, the bank issues three formal statutory legal notices. If dues remain unsettled, the bank is contractually empowered to auction the pledged jewelry through an open public bidding process.
- Surplus Distribution: Any auction proceeds remaining after settling the bank’s principal, accrued markup, legal notices, and auction costs are credited back directly into your savings or checking account.
Documentation Checklist & Application Steps
- Original valid CNIC / NICOP.
- Two recent passport-size photographs.
- Pledged gold jewelry physically brought to the designated gold-lending branch.
- Proof of basic income or business identity (NTN or basic bank statement; underwriting is simplified due to collateral).
- Processing Speed: Once purity is certified by the on-site goldsmith, funds are credited directly into your account within 24 to 48 hours.