When you pledge jewellery, lenders only consider the gold weight. Stones and gems may add sparkle, but they don’t add value to your loan. This guide explains how lenders measure your jewellery and why only pure gold decides your loan amount.
What is Stone Weight in Gold Jewellery?
Most gold jewellery includes stones like ruby, emerald, diamond, zircon, or American diamonds. While these stones enhance the ornament’s appearance, they do not add value when you apply for a Gold Loan.
Stone weight refers to the weight of the stones fixed on or inside the jewellery. Although they may look expensive, lenders do not consider them while determining the value of gold. This is because stones do not offer the same resale value or market stability. Therefore, lenders deduct the stone weight from the total weight of the ornament.
What Does Gold Weight Mean in Jewellery?
The term "gold weight" refers to the weight of pure gold in your jewellery after deducting the weight of any non-gold components. This is also known as net weight.
Lenders estimate the value of your gold and the suitable loan amount based on this net gold weight. If the ornament includes stones or other decorative materials, they do not provide a loan for the total weight. This is because these elements have unreliable resale value.
Why Do Lenders Differentiate Stone Weight from Gold Weight?
There are three main reasons why lenders value stones differently from gold:
1. Stones do not have a stable value
The market price of gold is transparent, reliable, and updated every day. Stone prices, on the other hand, are not as standardised or predictable as those of gold and differ greatly.
2. Stones cannot be melted and reused with Ease
Lenders recover their money by melting the pledged gold if the borrower fails to repay. Stones cannot be melted or reused in the same way; therefore, not suitable for valuation in a Gold Loan.
3. For a fair calculation
Deducting the stone's weight from the total jewellery weight would ensure a fair valuation for both the borrower and the lender.
How Does the Lender Calculate the Gold Loan Value?
The procedure of Gold Loan valuation is easy and simple:
Step 1: Weighing of Jewellery
First, the total weight of the jewellery is measured.
Step 2: Deducting the Stone Weight
After weighing the total weight of the gold jewellery, the stone weight is calculated. Then, lenders subtract the weight of the non-gold components to arrive at the net gold weight.
Step 3: Checking Purity
To ascertain its purity, the jewellery is tested, often with XRF (X-ray fluorescence) or similar equipment. This shows the amount of pure gold.
Step 4: Applying the Day's Market Gold Price
The lender uses the prevailing gold price for that day to calculate the value of the pure gold content.
Step 5: Applying the Allowed Loan-to-Value (LTV) Percentage
Lenders can provide up to the specified percentage of the gold's value as the loan amount. This is based on the Reserve Bank of India's LTV ratio guidelines, which typically set the LTV at 75% of the pledged gold value. This final figure determines the eligible loan amount.
Factors Affecting the Loan Amount on Pledged Gold
Several factors determine how much loan amount you would get for your gold jewellery. Here are some of them:
-
Net Weight: Lenders deduct the stone weight to determine the net gold weight. Higher net weight results in a higher loan amount.
-
Purity: Jewellery with higher purity (such as 22 Karat) is valued more than lower-purity gold like 18 Karat or 14 Karat.
-
Market Price: The loan amount depends on the prevailing market value of gold on the day of valuation.
-
LTV Ratio: A higher loan-to-value (LTV) percentage allows borrowers to receive a larger portion of the gold’s assessed value.
-
Type of Jewellery: Simple bangles or chains usually provide better value than stone-studded or intricate pieces.
-
Lender Policies: Each lender may have different interest rates, processing fees, loan tenure and LTV limits, which can affect the final loan amount.
Tips to Maximise Your Gold Loan Value
Follow these simple tips to get the best value for your loan against gold:
-
Choose High-purity Pieces: 22K jewellery provides more value.
-
Avoid Stone-heavy Jewellery: More stone weight lowers the gold weight and loan value.
-
Check Gold Prices: When market prices are high, you get more value for the pledged gold. You can use a Gold Loan calculator to estimate the correct value.
-
Pick Lenders with a Higher LTV Ratio: A higher LTV ratio increases the maximum loan amount you receive.
-
Compare Interest Rates: Choosing competitive interest rates helps you save on overall borrowing costs and get the best Gold Loan.
-
Gather Necessary Documents: Having valid KYC (Know Your Customer) documents helps to get quick loan approval.
-
Opt for Fair and Transparent Valuation: This ensures you receive the accurate value of your gold to meet urgent financial needs.
To Conclude
Knowing the difference between stone weight and gold weight helps you set the right expectations while taking a loan against gold. Lenders only consider the net weight and gold purity while deciding on your loan amount. Before visiting your lender's nearest branch, use an online Gold Loan calculator to check the expected value. Also, make sure you meet the Gold Loan eligibility criteria for quick approval.
Quick loan disbursal, flexible repayment options, and secure storage of your gold are some of the key Gold Loan features. These key features of a secured loan make it a reliable borrowing option. If you’re looking for a hassle-free online Gold Loan, apply now with Poonawalla Fincorp and get instant approval with flexible repayment options.
Read Also: 7 Benefits of Taking a Gold Loan
FAQs
Can stone weight ever increase my Gold Loan value if the stones are real or precious?
No. Even if the stones are precious, lenders do not add their value while calculating your Gold Loan amount because they only consider the pure gold weight.
Do lenders return the stones after I repay the Gold Loan online?
Yes. If your jewellery had stones, you get back the piece exactly as you gave it, including non-gold elements.
Can I remove the stones myself before I apply for a Gold Loan?
You can remove the stones; however, it is not recommended as it may damage the gold ornaments.
Is there a difference in valuation for hand-made jewellery vs machine-made jewellery?
Yes. Hand-made jewellery may have slightly more weight variations due to design and soldering, which lenders adjust during purity and net-weight checks.
Will hollow or lightweight designs reduce my Gold Loan value?
Yes. Hollow or lightweight designs often contain less real gold despite appearing large. This reduces the net gold weight and therefore lowers the eligible loan amount.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply