When you need quick funds, a gold loan can be a convenient solution. By pledging your gold jewellery or coins as collateral, you can access money without having to sell your precious assets. But how is the value of a gold loan determined per gram? Let’s dive into the key factors that influence gold loan per gram rates and calculations.
Decoding Gold Purity and Its Impact on Loan Value
One of the primary factors affecting gold loan per gram value is the purity of the gold being pledged. Gold purity is measured in carats, with 24 carats representing the purest form. Most jewellery in India is crafted using 22-carat or 18-carat gold. As a rule of thumb, higher purity translates to a higher loan amount per gram.
For instance, if you pledge a 10-gram gold necklace of 22-carat purity, you can expect a higher loan value compared to pledging the same weight in 18-carat gold. Lenders assess the purity using specialised tests to ensure accurate valuation.
Understanding Gold Purity Measurements
| Carat | Purity Percentage |
| 24K | 99.9% |
| 22K | 91.6% |
| 18K | 75% |
| 14K | 58.3% |
The Role of Market Price in Gold Loan Valuation
Another crucial factor that determines gold loan per gram rates is the current market price of gold. Gold prices fluctuate daily based on various economic and geopolitical factors. When you apply for a gold loan, the lender considers the prevailing market price for gold loan per gram value calculation.
For example, let’s say the current market price of 24-carat gold is ₹5,000 per gram. If you pledge 20 grams of 22-carat gold jewellery, the lender will first calculate the value of your gold based on the purity and weight:
22-carat gold value = (22/24) × ₹5,000 × 20 grams = ₹91,666.67
The lender then applies their loan-to-value ratio to determine the final loan amount, which we’ll discuss next.
Loan-to-Value Ratio: How Much Can You Borrow?
The loan-to-value (LTV) ratio is the percentage of the gold’s value that the lender offers as a loan. In India, the Reserve Bank of India (RBI) has set a maximum LTV ratio of 75% for gold loans offered by banks. However, some lenders may offer lower LTV ratios based on their risk assessment and lending policies.
Let’s continue with our previous example. If the lender offers a 75% LTV ratio, the maximum loan amount you can avail against your 20 grams of 22-carat gold would be:
Maximum loan amount = 75% × ₹91,666.67 = ₹68,750
It’s important to note that while a higher LTV ratio may seem attractive, it also means a higher interest outgo over the loan tenure. Assess your repayment capacity and borrow wisely.
Estimating Your Gold Loan Eligibility
To get an estimate of how much you can borrow against your gold, you can use a simple gold loan per gram calculation:
Loan amount per gram = (Purity / 24) × Market price per gram × LTV ratio
For instance, if the current market price of 24-carat gold is ₹4,800 per gram and the lender offers a 70% LTV ratio, the loan amount per gram of 22-carat gold would be:
Loan amount per gram = (22 / 24) × ₹4,800 × 0.70 = ₹3,080 per gram
So, if you pledge 25 grams of 22-carat gold, your estimated loan amount would be:
Estimated loan amount = ₹3,080 × 25 grams = ₹77,000
Keep in mind that this is just an estimate, and the actual loan amount may vary based on the lender’s assessment and your creditworthiness.
Types of Gold Accepted for Loans
When it comes to gold loans, not all forms of gold are treated equally. Lenders typically accept the following types of gold:
- Gold jewellery
- Gold coins
- Gold bars or bullion
However, most lenders prefer gold jewellery and coins as they are easier to evaluate and have a wider market for resale if needed. Gold ETFs, digital gold, or paper gold are generally not accepted as collateral for gold loans.
Making an Informed Decision
Before applying for a gold loan, consider the following factors to make an informed decision:
- Compare lenders: Evaluate gold loan per gram rates, LTV ratios, and processing fees across multiple lenders to find the best deal.
- Check loan tenure: Choose a loan tenure that aligns with your repayment capacity to avoid overburdening yourself.
- Read the fine print: Understand the terms and conditions, including any hidden charges or prepayment penalties.
- Ensure safety: Opt for a lender with secure storage facilities and adequate insurance coverage for your pledged gold.
Airtel Finance offers competitive gold loan per gram rates and a seamless application process through the Airtel Thanks app. With transparent terms and secure storage, you can confidently unlock the value of your gold when you need funds.
Wrapping Up
Understanding how gold loan per gram rates are calculated empowers you to make informed borrowing decisions. By considering factors like gold purity, market prices, and LTV ratios, you can estimate your loan eligibility and compare offers from different lenders.
Remember to assess your repayment capacity and read the loan terms carefully before pledging your gold. With a trusted lender like Airtel Finance, you can access funds against your gold conveniently and securely. Explore your gold loan options today at Airtel Finance and meet your financial needs with ease.
FAQs
- What is the minimum and maximum loan amount I can avail against gold?
The minimum and maximum loan amounts vary across lenders. Some lenders offer loans as low as ₹1,500, while others have a higher minimum threshold. The maximum loan amount depends on the value of your pledged gold and the lender’s policies.
- How is the purity of gold determined for loan purposes?
Lenders use specialised equipment to test the purity of the pledged gold. Common methods include acid tests, electronic gold testers, and X-ray fluorescence (XRF) analysers. These tests help determine the accurate carat value of the gold.
- Can I get a loan against gold jewellery with gemstones?
Yes, you can get a loan against gold jewellery with gemstones. However, the loan amount will be based only on the weight and purity of the gold content. The value of the gemstones is not considered in the loan valuation.
- How long does it take to get a gold loan approved?
Gold loan processing is generally quick, and you can get the loan amount disbursed within a few hours to a couple of days, depending on the lender. Some lenders offer instant loan approvals and disbursement within 30 minutes.
- Are there any restrictions on how I can use the gold loan amount?
No, there are typically no restrictions on how you can use the funds from a gold loan. You can utilise the money for various purposes, such as medical emergencies, business needs, education expenses, or personal requirements.
