Gold has long been regarded as a symbol of wealth and financial security. In many Indian households, it serves not only as an heirloom but also as a dependable financial asset in times of need. A Gold Loan is one of the most effective ways to leverage the value of your gold while retaining ownership. As the concept may seem very straightforward, many of us always wonder how the loan amount is determined. So, in this blog let us understand how loan amount is determined, loan rate as per gold purity, and the tips for getting highest value against Gold Loan. Let’s get Started!
How is Gold Loan Amount Calculated
The amount for a Gold Loan is calculated based on several key factors, that helps the lender determine the value of gold you are pledging. The following are the factors based on which the loan amount is decided:
- Loan-to-Value Ratio
According to the Reserve Bank of India, a lender can offer only up to 75% of the gold’s value as a loan. For example, if you submit gold worth ₹1,00,000, the maximum loan amount you can get is ₹75,000.
- Gold Purity
Most of the lending institutions accept gold ornaments and coins between 18 and 22 Karats. If the gold ornament contains any metal or gemstones, the amount will be evaluated based on pure gold.
Also Read: What is Gold Loan or Loan Against Gold?
- Current Market Value
Gold price is usually based on the average market rate over the past 20-30 days. This price is typically based on the value of 22 karat gold per gram.
- Net Weight of Gold
Only the pure gold is considered when calculating the net weight of gold, leaving out the gemstones, alloy or any other elements.
What Does a Gold Loan Per Gram Mean
The Gold Loan per gram is referred to the loan amount you can avail based on each gram of gold you pledge. It is calculated based on purity, weight and the loan-to-value ratio.
Let’s understand it with an example:
Suppose, the current market value of gold is ₹2,000 and lending institution offers you an LTV of 75% so the loan amount per gram would be:
Gold Loan amount per gram = ₹2000 x 75% = 1500.
This means, for every gram of gold you pledge, you will be receiving ₹1500 as a loan. Also, the loan amount may vary based on the purity of gold. The higher the purity, the higher the loan amount.
How to Calculate Gold Loan Rate as Per Purity
The process of calculating Gold Loan rate as per the purity is quick and simple. Here are the factors you need to consider:
- The weight of gold you are considering pledging.
- Purity level of gold, which must be between 18 – 22 karats.
- The average price of gold calculated for the past 20 to 30 days.
What is the Current Gold Loan Rate Per Gram
The current rate per gram of gold keeps on fluctuating based on the market conditions, including the demand for gold and global gold price.
Tips to Get the Highest Loan Amount Against your Gold
Maximise the value of your gold by using these tips:
- Gold Purity: Choose the right purity of gold for better loan amount.
- Market Price: Stay updated with the current market price.
- Gold Weight: Get the right weight of your gold for avoiding underestimation.
Also Read: 7 Benefits of Taking a Gold Loan
To Conclude
Calculating the loan amount for a Gold Loan per gram is simple and can help you decide how much you can borrow by pledging your gold. Factors like gold purity, net weight, current market price and LTV ratio determine its value. By understanding the calculation, current market price and tips to get the highest loan amount, you can make an informed decision while applying for a Gold Loan. If you are looking for a lender who is trustworthy and offers the best LTV for your gold, check out Poonawalla Fincorp’s Gold Loan. Apply now!
Frequently Asked Questions
1. What is the difference between carat and karat?
The terms "carat" and "karat" are often confused, but they refer to different measurements:
- Carat: Measures gemstone weight (1 carat = 0.2 grams).
- Karat: Measures gold purity (24-karat = pure gold).
2. Will Purity of gold affect the loan amount?
Yes, the purity of gold may determine the sanctioned loan amount. However, it may vary from lender to lender.
3. What are the eligibility criteria of a Gold Loan?
The following are the eligibility criteria you must meet to avail of a loan against gold:
- Age: Between 21 and 65 years.
- Citizenship: Indian.
- Gold Purity: 18 to 22 Karat.
4. What are the documents required for applying for a Gold Loan?
A Gold Loan from Poonawalla Fincorp requires you to submit just a few KYC documents at the time of loan application.
5. Can I get a gold loan if my gold is already pledged elsewhere?
No, the gold must be free of debt or other financial liability to be pledged as a collateral.