How Much Loan Can I Get Per Gram of Gold?

Introduction

How much value can your gold unlock?

Whether you’re looking to fund a business requirement, meet an education expense, manage a planned purchase or take care of a personal financial need, a Gold Loan can be a convenient way to access funds.

Unlike traditional borrowing, a Gold Loan uses your gold as collateral, which can make the process simpler with minimal documentation. And since you don’t have to sell your jewellery, you can unlock its financial value while retaining ownership of your precious gold.

But one question is likely to come to mind: How much loan can I get per gram of gold?

The answer isn’t fixed. It primarily depends on the prevailing market price of gold, along with factors such as the purity and weight of your gold jewellery and the applicable Loan-to-Value (LTV) limit set by the RBI.

How gold value is calculated

Most of the financial institutions follow the below equation.

Gold Value = Gold Weight (in grams) × Current Market Price per Gram (Based on Gold Caratage)

But the financial institutions wouldn’t be lending the total value of your gold jewellery. Because the jewellery is the collateral against which the loan is provided. The Loan is determined by LTV (Loan-to-Value) percentage.

So, the final loan value is calculated by:

Loan Amount = Gold Value * LTV Ratio (%)

Factors Influencing Loan Amount

You may be surprised to learn that two people pledging gold jewellery of the same weight do not always get the same loan amount. But, why does this happen? The answer lies in factors such as gold purity, net gold weight, and applicable Loan-to-Value (LTV) guidelines.

1. Daily Bullion Market Rates:

The key reason is that the gold prices fluctuate in both international and domestic markets on a daily basis. Since the eligible loan amount is based on the prevailing gold rate, two borrowers pledging same amount of gold in different days may qualify for different loan amount.

2. Net Weight vs. Gross Weight:

Two Jewellery pieces may appear to weigh the same, but the amount of pure gold in each piece may differ. Jewellery often contains non-gold materials like enamel, gems, lac or artificial stones. So, during the evaluation, the weight of such non-gold components is deducted and the loan amount is calculated based on the net gold weight.

3. Purity:

Gold Jewellery is available in different purity levels like 18K, 22K and 24K. If the jewellery purity is higher, it means that it contains greater proportion of pure gold, thus increasing qualification for a higher loan amount. As a result, two jewellery pieces with same net weight may still have different values if the purity levels differ.

4. LTV Cap:

Loan to Value (LTV ratio) is another important factor used in determining the eligible loan amount. RBI guidelines prescribe the maximum loan that can be sanctioned against the assessed value of the pledged gold. The final loan amount is therefore influenced not only the gold’s value but also the prescribed LTV guidelines.

Purity and Weight Considerations

We understand that purity is a factor which influences loan amount. This is further explained below:

RBI LTV Guidelines

The LTV Ratio is the percentage of how much loan is sanctioned by financial institutions against the assessed value of the pledged jewellery.It is a tiered slab-based structure as explained below:

Example Calculations

Gold Value = Gold Weight (in grams) × Current Market Price per Gram (Based on Gold Caratage)

Loan Amount = Gold Value * LTV Ratio (%)

The final loan amount will depend on the prevailing market price of gold, purity, net gold weight and the applicable LTV guidelines.

Chola Gold Loan Assessment Process

When seeking a lender, it is crucial to prioritize speed, safety, convenience. Your gold possesses both financial and sentimental value. This balance between prompt service and unwavering security is the reason Cholamandalam Investment and Finance Company (Chola) has gained the confidence of over 4.3 million customers throughout India.

The typical process involves:

• Visiting the nearest Chola branch.
• Submitting the necessary KYC documents.
• Having your gold jewellery assessed by qualified personnel using non-destructive testing.
• Understanding the eligible loan amount, repayment options and applicable fees.
• Completing the required formalities.
• Receiving the approved loan amount following successful verification.

To know more about Chola Gold loans, click here: https://www.cholamandalam.com/gold-loan

Here are the features that make borrowing from Chola a smooth experience:

• Rapid 30-Minute Processing due to digitalization of process
• Bank-Level Security Protocols equipped with a 10-layer security system (high-security vaults, 24/7 CCTV surveillance, RFID tracking and centralized OTP-controlled vault access)
• Equitable and Transparent Valuation of your precious jewellery

Tips to maximise loan value

Follow the below few practical tips to get better loan value:

1. Always prefer a plain jewellery over studded jewellery to have least deductions- in weight
2. Gold price is always fluctuating. If it is not an emergency need, track the price and get the loan when the daily price is higher.
3. Jewellery along with bill can help.

Conclusion

By understanding the terms like LTV Ratio, purity, weight can help you to get better loan value. This also gives a rough idea on how much amount you can expect from the financial institutions to plan your sources accordingly. Always choose a trusted and reputable partner like Chola, to ensure safety and good valuation of your jewellery. Unlock the value of your gold which is sitting idle in locker.

Frequently Asked Questions

1. Does the loan per gram rate change every day?

Yes. Gold loan per-gram rates are tied directly to prevailing international and domestic market bullion prices, which fluctuate daily.

2. Are stone weights included in the loan calculation?

No. Lenders deduct the weight of all embedded stones, gems, enamel, or non-gold materials. You receive funding strictly for the net weight of pure gold.

3. Can I pledge 18-carat gold jewellery for a loan?

Yes, 18K gold is accepted by most lenders. However, because 18K gold contains 75% pure gold compared to 22K's 91.6%, the loan amount sanctioned per gram will be proportionally lower.

4. Is primary gold (like bullion bars) eligible for a gold loan?

No. RBI guidelines specify that gold loans can generally only be granted against gold jewellery and ornaments. Primary gold bars or coins above specific regulatory limits are excluded.

5. What happens if gold prices drop significantly after I take the loan?

Your sanctioned loan amount remains unchanged during your active tenure. However, maintaining regular interest payments ensures your account stays in good standing regardless of market price fluctuations.