Gold Loan

How to Calculate Gold Loan Interest Rates

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18 Apr 2025 |3 Minutes
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Gold Loan is one of the most popular financial solutions for getting quick funds by leveraging your gold. One of the factors that you must consider while taking a loan is the interest rate and how it is calculated. In this blog, will help you understand how to calculate interest rates, calculation process, the factors that influence these rates and tips to secure the most competitive terms. So, let’s dive in!

3 Steps to Calculate Interest Rate on a Gold Loan

The steps to calculate the interest rate on a loan against gold involves the loan structure and the repayment option. Here is how you can calculate the interest rate on your Gold Loan:

1. Identify the Key Parameters

Your loan interest rate is calculated on the following key parameters:

  • Principal Amount: The loan amount you borrow against your gold.
  • Interest Rate: The percentage of interest charged to you on borrowed amount.
  • Loan Tenure: Duration of the loan.  
  • Gold Purity and Weight: Purity and weight of gold influence the loan amount your will receive against your Gold Loan.

2. Type of Interest Rate

 The interest rate on Gold Loan can be of two types:

  • Fixed Interest Rate: The in the fixed interest rate that interest rate remains constant throughout the loan tenure.
  • Floating Interest Rate: This type of interest rate varies based on the market conditions and rate.

3. Formula Calculation: Typically, simple interest is followed to calculate the Gold Loan. Here is how you can calculate one:

Interest rate = PxRxT, where:

P= Principal amount

R= Rate of interest

T= Tenure

For example, you are pledging your gold against ₹10,00,000 with an interest rate of 10% for 1 year, the interest rate would be calculated as:

₹10,00,000 x 0.10 x 1= ₹1,00,000

Also Read: How is a Gold Loan Amount Calculated?

5 Factors Influencing Gold Loan Interest Rates

Here are 5 primary factors that influence interest rates:

  • Loan Amount

This is the amount of money that you borrow against the gold you are pledging. The borrowed amount impacts the interest rate as the lender may offer a better interest rate on higher loan amount.

  • Loan Tenure

The loan tenure plays an important role in calculating the interest rate and overall loan amount. Generally, a shorter loan term comes with lower interest rates and vice versa.

  • Current Market Price

The market value of gold keeps on fluctuating due to the changes in the market demand for gold. As the value of gold increases the lender may adjust the interest rate to manage their risk. When the price of gold is high you may receive favourable terms due to the increase in rate of the current market price.

  • Loan-to-Value Ratio

The loan-to-value (LTV) ratio refers to the amount of financing you can receive relative to the value of the gold pledged as collateral. As per the guidelines of the Reserve Bank of India (RBI), financial institutions can offer a loan amount of up to 75% of the pledged gold's value.

  • Company Policy

Interest rates may vary across lenders, as each institution follows distinct policies that influence the loan interest rates they offer.

Also Read: What is Gold Loan or Loan Against Gold?

Interest Rate and Charges for a Gold Loan

If you are planning to get a loan against your gold with an attractive interest rate and minimal charges, check out Poonawalla Fincorp’s interest rate and charges below:

Interest Rate

Starting from 11% p.a.

Loan Amount

₹25,000 to ₹50,00,000

 

Loan Tenure

12 Months

Processing Fees

Applicable as per scheme with maximum cap of 1% of loan amount

Stamp Duty

At actuals as per state laws applicable from time to time.

Default Charges

6% per annum on outstanding loan amount

Notice Charges

INR 200/- + applicable taxes per notice

Foreclosure Charges 

Within 30 days – up to 1% of loan amount + applicable taxes

Part Release Charges

INR 150/- + applicable taxes per transaction

Auction Charges

Rs.1500/- + applicable taxes

Safe Custody Charges

INR 5/-per gram of net weight per month, payable at the time of closure/foreclosure or renewal

Hidden Charges

Nil

 

Tips to Choose the Best Interest Rate for Your Gold Loan

Consider the following tips to get the best interest rate on your Gold Loan:

  1. Compare Offers: Check and compare the interest rate offered by different lenders and choose the interest rate that suits you the best.
  2. Repayment Structure: Understand the repayment structure, if it is EMI based, bullet repayment mode or both.  
  3. Check Additional Fees and Charges: Check for the processing fees, penalty charges, and valuation charges other than the interest rate.
  4. Negotiate with the Lender: Having a good or high credit score can help you get favourable interest rates.

Also Read: 7 Benefits of Taking a Gold Loan

To Conclude

Calculating and understanding the factors that influence the Gold Loan interest rate is essential to manage your loan. By understanding the factors such as loan amount, tenure, gold purity and repayment structure you can make an informed decision. Getting a loan against your gold can effectively address your financial requirements. However, it is essential to approach it with clear understanding. With the help of Gold Loan from a trusted lender like Poonawalla Fincorp, you can meet all your financial needs with ease. So, wait no more and get the true value of your gold now!

FAQs

1. What is the interest rate offered by Poonawalla Fincorp on Gold Loan?

The interest rate offered by Poonawalla Fincorp on Gold Loan starts at 11% per annum.

2. What are the documents required for getting a loan against gold?

You can avail of a Gold Loan by submitting the KYC documents, such as a copy of your PAN card, Aadhaar card, driving license, voter ID, and passport

3. I’m 18 years old; can I get a loan against gold?

No, you must be between 21 and 65 years old to avail of a Gold Loan from Poonawalla Fincorp.

4. What is the form of gold accepted by Poonawalla Fincorp?

Any gold jewelry or ornament between 18 and 22 karat is accepted by Poonawalla Fincorp.

Disclaimer

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
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431		$("#success_suscrib").css("display","none"); 
432	 
433		//const emailRegex = /^[a-zA-Z0-9._%+-]+@gmail\.com$/; 
434		const emailRegex = /^[a-zA-Z0-9._%+-]+@(gmail\.com|yahoo\.com|yopmail\.com|outlook\.com|[a-zA-Z0-9.-]+\.[a-zA-Z]{2,})$/; 
435   if(emailRegex.test(emailId)){ 
436		  emailInput.classList.remove('danger'); 
437		 $("#error_val").css("display","none"); 
438		 $("#error_req").css("display","none"); 
439	 }else{ 
440		 if(emailId ==""){	 
441			 emailInput.classList.add('danger'); 
442		  $("#error_val").css("display","none"); 
443			$("#error_req").css("display","block"); 
444			return; 
445	   }else{ 
446			 emailInput.classList.add('danger'); 
447			  $("#error_val").css("display","block"); 
448			  $("#error_req").css("display","none"); 
449			 return; 
450
451		   
452
453	//	return; 
454	 
455    return new Promise((resolve, reject) => { 
456        $.ajax({ 
457             url: baseUrl1+"/o/subscription/get-lead-by-email?email="+emailId, 
458            type: 'GET', 
459           //	headers: { 
460           // 'Authorization': 'Bearer ' + _token 
461           //  }, 
462            dataType: 'json', 
463            success: function (data) { 
464                resolve(data); 
465                if (data && data?.length > 0) { 
466                    //	$("#success_suscrib").css("display","block"); 
467                    passLeadGenerate(data[0].ProspectID, emailId); 
468                } else { 
469                    $("#success_suscrib").css("display", "none"); 
470                    newSuscribed(emailId); 
471
472								$("#waitd ,.waitd").css("display","none"); 
473                $.each(data, function (index, loan) { 
474                    $('#loanList').append($('<option></option>').attr('value', loan.lId).text(loan.loanName)); 
475                }); 
476            }, 
477 
478            complete: function () { 
479            }, 
480            error: function (xhr, status, error) { 
481                reject(new Error("Error fetching data:", error)) 
482 
483
484        }); 
485    })	 
486
487		 
488</script> 
489 
490 
491 
492<#assign baseUrl= themeDisplay.getPortalURL() > 
493<#assign currentPageUrl = themeDisplay.getPortalURL() + themeDisplay.getURLCurrent()> 
494<#assign articles = []>  
495 
496 
497 
498<script type="application/ld+json"> 
499
500          "@context": "https://schema.org/",  
501          "@type": "BreadcrumbList",  
502          "itemListElement": [{ 
503            "@type": "ListItem",  
504            "position": 1,  
505            "name": "Home", 
506            "item": "${baseUrl}"   
507          },{ 
508            "@type": "ListItem",  
509            "position": 2,  
510            "name": "Blogs", 
511            "item": "${baseUrl}/blogs/all-blogs"   
512          },{ 
513            "@type": "ListItem",  
514            "position": 3,  
515            "name": "${themeDisplay.getURLCurrent()?split('/')[2]?replace("-"," ")?capitalize}", 
516            "item": "${themeDisplay.getPortalURL()}/blogs/${themeDisplay.getURLCurrent()?split('/')[2]}"   
517          },{ 
518            "@type": "ListItem",  
519            "position": 4,  
520            "name": "${title}", 
521            "item": "${themeDisplay.getPortalURL()}${themeDisplay.getURLCurrent()}"   
522          }] 
523
524    </script>