How Much Gold Loan Can You Get: LTV Ratio & Calculation Methods

The Gold Loan amount you can get is based on your gold’s purity and net weight, the lender’s Loan-to-Value (LTV) ratio, and the current market value of gold. This calculation helps you determine how much of a loan you can get. Let’s understand the LTV ratio and how lenders value pledged gold, and learn to calculate your potential loan amount.

What is the LTV Ratio in a Gold Loan?

Loan-to-Value (LTV) ratio in a Gold Loan is the percentage of your gold’s market value that a lender can offer as a loan. To ensure fair lending practices, the Reserve Bank of India (RBI) has currently mandated a maximum LTV cap of 75% for gold loans across all lenders. The lenders may set lower internal LTV limits based on their risk assessment.

Note: Lenders could also follow the RBI’s revised LTV guidelines, which will take effect widely by April 2026. These aim to enhance access to credit while maintaining appropriate risk management.

The revised guidelines set the following maximum loan-to-value ratios based on the total gold loan amount:

Also Read: 7 Benefits of Taking a Gold Loan

How Your Gold’s Value is Calculated for a Loan

Here are the steps and considerations lenders follow to evaluate your gold's precise market value before applying the loan-to-value ratio:

Step 1: Assessing Purity (Caratage)

An in-house valuer assesses the purity of the gold items.

• Lenders typically accept gold jewellery ranging from 18 to 24 karats

• Higher purity usually results in a higher eligible Gold Loan amount

Step 2: Measuring Net Weight

Your gold ornaments are weighed to determine their exact grammage.

• The weight focuses exclusively on the net weight of the gold content

• Stones, gems, enamel, and other components are excluded

Step 3: Finding the Per-Gram Rate

Lenders calculate the value based on the prevailing gold rate for the specific purity.

• The rate is determined using either the average closing price of 22-karat gold for the preceding 30 days or the closing price from the previous day

• Prices are sourced from the India Bullion and Jewellers Association (IBJA) or a SEBI-regulated commodity exchange

• After valuation, the Loan-to-Value (LTV) ratio is applied to determine the eligible loan amount

Calculating Your Final Gold Loan Amount: An Example

Let’s put the LTV ratio and gold valuation together to see how your final Gold Loan amount is calculated.

• Total Weight of Gold Ornaments: 50 grams

• Purity of Gold: 22 Karat

• 22 Karat Gold’s rate: ₹11,470 per gram (for example)

• Lender’s LTV Ratio: 75%

Calculation Steps:

• Calculate the total gold value: 50 grams x ₹11,470/gram = ₹573,500

• Apply the Loan-to-Value ratio: 75% of ₹573,500 = ₹430,125

In this example, you’d be eligible for a maximum amount of ₹4,30,125. The final sanctioned amount will be confirmed after the lender’s valuation and any applicable processing fees are deducted. You will then pay interest only on the principal amount disbursed to your bank account.

Also Read: Gold Loans for Women: A Beginner-friendly Guide to the Process

How to Apply for a Gold Loan

Applying for an Instant Gold Loan is straightforward and typically involves minimal documentation. Most lenders now offer both offline and online gold loan application options to ensure quick loan disbursal.

1. Check Eligibility: Typically between 21 and 65 years of age

2. Gather Required Documents:

• Identity proof (Aadhaar, PAN, Passport, Voter ID)

• Address proof (Utility bill, Passport)

• Recent passport-sized photographs

• Proof of ownership of the gold jewellery to be pledged (if available)

3. Apply: Visit the nearest branch or apply online. Submit documents, schedule a gold valuation appointment, and track your application status.

4) Gold Valuation: The lender will assess your gold’s purity and weight, and provide an approximate value based on the market rate and LTV ratio.

5) Loan Approval: Post valuation of your gold and document verification, the loan is approved and disbursed directly to your bank account, often within a few hours.

Also Read: Why Choose Poonawalla Fincorp for Your Gold Loan Needs?

To Conclude

Knowing the LTV calculation method helps you estimate how much you can borrow when pledging your gold, whether you need funds for medical emergencies, financial stability, business expansion, or educational expenses.

If you’re looking to pledge your gold, Poonawalla Fincorp offers a hassle-free Gold Loan process with competitive interest rates and swift approval.

FAQs

What is the maximum loan-to-value (LTV) I can get for a Gold Loan in India?

The maximum LTV Ratio for gold loans is capped at 75% by RBI guidelines. Additionally, lenders may have adopted the revised LTV guidelines that will come into effect by April 2026. Under these norms, they can offer an LTV of up to 85% for loans of up to ₹2.5 lakh.

Do lenders value the stones or diamonds in my jewellery for a Gold Loan?

No, lenders only consider the net weight and purity of the gold in your gold ornaments. The value of any stones, gems, or other metals is deducted during the gold valuation process.

Can I get a loan against 18-karat gold?

Yes, most lenders, including NBFCs, provide gold loans against gold ornaments with a purity of 18 karats or higher.

How do lenders decide the maximum limit for a Gold Loan?

The maximum Gold Loan amount is based on the final value of your gold after assessing purity and net weight. The applicable LTV percentage is applied, as this ratio determines your borrowing amount. The principal amount also depends on lender policies, loan terms, and internal risk checks.