How Is the Gold Loan Amount Per Gram Calculated?
When you require quick cash, Gold Loans can be a convenient and efficient funding option. A Gold Loan allows borrowers to pledge their gold jewellery in exchange for money. Before applying for a loan, lenders should be aware of the Gold Loan amount per gram.
Read further to understand how lenders arrive at the loan amount per gram, what factors contribute to this calculation, and what you can do to receive the maximum value for your gold.
What is the Gold Loan Amount Per Gram?
Gold Loan amount per gram refers to the value of loan funds you may receive for each gram of gold pledged to the lender. For example, if the gold rate is Rs 10,000 per gram, and you pledged 50 grams of gold, the gold value would be around Rs 5 Lakh. However, lenders may not offer the full value of your pledged gold, whereas you may receive up to 75 to 85% of the gold's value.
For instance, if the market rate of 24-carat gold is Rs 1 Lakh, 10 grams of 22-carat gold will be Rs 91,600. If you pledge 50 gms of 22-carat gold, its value will be Rs 4,58,300. However, at an LTV ratio of 80%, you may receive a Gold Loan amount of around Rs 3,66,640. The final loan amount you receive depends on the lender's policies and applicable charges.
Stepwise Method to Calculate the Gold Loan Amount
The following are the steps to calculate the Gold Loan amount per gram:
- Evaluation of Gold Purity
The first factor determining your Gold Loan amount is the purity of your gold. Lenders may only accept gold from 18 to 22-carat purity. A higher purity can derive more loan value from the same amount of gold. For example, a 22-carat gold item may fetch a higher loan amount than an 18-carat piece.
- Gold Weight
After checking the gold purity, the lender evaluates the gold weight you pledge. However, they will subtract the weight of any precious stones or gems, as their value is not included in the Gold Loan calculation.
- Establishing the Market Price
The gold price fluctuates regularly, based on the international market price, local currency fluctuations, and market demand. Lenders may use the average market price of the last 30 days to avoid daily fluctuations. The result can provide a reasonable calculation of the Gold Loan amount per gram.
- Application of the Loan-to-Value (LTV) Ratio
When lenders understand the weight, purity, and market price of the gold, they calculate the LTV ratio. For instance, if your gold is worth Rs 1 Lakh, the lender can offer a loan of around Rs 85,000 as per the 85% LTV ratio.
- Total Loan Amount
They multiply the amount per gram by the gold weight. It provides the total amount of loan you may borrow. They may deduct a minimal amount to cover processing fees and other charges.
Factors Impacting Gold Loan Amount Calculation Per Gram
A variety of factors may dictate the precise amount that you are provided with per gram of gold:
● Gold Purity: Gold purity has a significant impact on loan calculation. For example, a loan secured on 22-carat gold is higher than the loan amount per gram for 18-carat jewellery.
● Current Market Price of Gold: Because the gold price may change frequently, the Gold Loan amount per gram will also change regularly. When the price increases, you can borrow a higher loan amount for the same weight of gold.
● Loan-to-Value Ratio (LTV): The lenders can lend up to 75 to 85% of the gold's value, as per the eligibility.
● Type of Gold Item: Many lenders may accept only hallmarked jewellery to verify the asset's purity and authenticity.
● Lender's Policies: Different lenders may have varying policies to calculate the average gold price when calculating the Gold Loan amount per gram.
How to Ensure You Get the Maximum Amount for Your Gold?
If you want to increase the Gold Loan amount you receive per gram, here are some simple steps to take:
● Follow Gold Rates Regularly: Stay updated about the latest market prices before applying for a loan. Applying for a loan when the gold price is high will get you more value for the same gold weight.
● Pledge Higher Purity Gold: Instead of pledging all your jewellery, provide jewellery with a higher carat value. Lenders may offer more value per gram for 22-carat gold compared to 18-carat assets.
● Pledge Gold with a Reputable Lender: Choose an established and trusted institution that offers transparent value for your jewellery and good loan value.
● Pledge Gold Only: If possible, pledge plain jewellery without diamonds or any other metals or stones. The lender will deduct their weight and value when calculating the Gold Loan amount.
● Use a Gold Loan Calculator: Before applying for a loan, use an online gold loan calculator to estimate the value of your gold. This way, you will be better prepared for the loan deal and repayment.
Advantages of Knowing the Gold Loan Amount per Gram
Knowing the Gold Loan amount of your gold will help a borrower in several ways, such as:
● Financial Planning: It gives an estimate of how much you can expect to receive before approaching a lending institution.
● Transparency: You can determine whether or not you are receiving a fair value for your pledged gold.
● Comparison: It lets you compare terms from multiple lenders to select a suitable one.
● Better Negotiation: Knowing the current rate can help you negotiate better with your lender.
Conclusion
The Gold Loan Amount per gram depends on several factors, like the gold purity, market price, and LTV ratio. Knowing how lenders calculate the final loan amount helps you make sound financial decisions and ensure you get a good loan deal. If you are applying for a Gold Loan, check the current gold rate, pay attention to your jewellery's hallmarking and purity, and compare offers from various lenders to get an ideal value. RBI-compliant lenders ensure transparency, offer attractive interest rates, and flexible repayment options to ensure a smooth and hassle-free loan experience.
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