Gold loans are a popular financial product in India, offering a quick and convenient way to secure funds by pledging gold as collateral. Understanding the gold loan rate per gram is crucial for borrowers, as it directly impacts the loan amount and interest rate. In this blog, we will explain how the gold loan rate per gram is determined, the factors influencing it, and provide useful tips for borrowers. We will also discuss the current trends when it comes to today’s gold loan rate per gram.
What is the gold loan rate per gram?
The gold loan rate per gram is the amount of money a lender is willing to offer for each gram of gold pledged as collateral. This rate varies between lenders and is influenced by several factors, including the market price of gold, the purity of the gold, and the lender’s policies. The higher the gold loan rate per gram, the higher the loan amount a borrower can receive.
Factors influencing the gold loan rate per gram
Several factors determine today gold loan rate per gram. Understanding these factors can help borrowers make informed decisions when opting for a gold loan.
- Market price of gold
- The prevailing market price of gold is the primary factor influencing the gold loan rate per gram. Gold prices fluctuate daily based on global economic conditions, demand and supply dynamics, and geopolitical events.
- Lenders use the current market price of gold to determine the loan rate per gram. When gold prices are high, borrowers can expect a higher loan rate per gram and vice versa.
- Purity of gold
- The purity of gold, measured in karats, plays a significant role in determining the loan rate per gram. Gold jewellery in India typically ranges from 18 karats to 24 karats, with 24 karats being the purest form.
- Lenders offer higher loan rates for gold with higher purity. For instance, 24-karat gold will fetch a higher loan rate per gram compared to 18-karat gold due to its higher intrinsic value.
- Lender’s policies
- Different lenders have varying policies and criteria for determining the gold loan rate per gram. Factors such as the lender’s risk appetite, competition in the market, and customer relationship can influence the rate offered.
- Some lenders may offer promotional rates or discounts, so it’s advisable to compare rates from multiple lenders to get the best deal.
- Loan-to-value (LTV) ratio
- The loan-to-value ratio is the percentage of the gold’s value that a lender is willing to offer as a loan. The Reserve Bank of India (RBI) has set the maximum LTV ratio for gold loan at 75%. This means that lenders can offer loans up to 75% of the gold’s value.
- A higher LTV ratio means a higher loan amount for the same quantity of gold. Afterwards, Borrowers should check the LTV ratio offered by different lenders to maximise their loan amount.
Calculating the gold loan rate per gram
To calculate the gold loan rate per gram, lenders typically follow these steps:
- Determine the gold’s value: The lender assesses the current market price of gold and the purity of the gold being pledged. For example, if the market price of 24-karat gold is ₹5,000 per gram, the value of the gold is ₹5,000 multiplied by the number of grams pledged.
- Apply the LTV ratio: The lender applies the LTV ratio to the gold’s value to determine the maximum loan amount. For instance, with an LTV ratio of 75%, the loan amount would be 75% of the gold’s value.
- Calculate the loan rate per gram: The lender divides the maximum loan amount by the number of grams of gold pledged to determine the loan rate per gram.
Example calculation
Let’s assume a borrower pledges 50 grams of 22-karat gold, and the current market price of 24-karat gold is ₹5,000 per gram. Here’s how the gold loan rate per gram is calculated:
- Determine the value of 22-karat gold:
Market price of 24-karat gold: ₹5,000 per gram
Value of 22-karat gold (approximately 91.6% purity): ₹5,000 x 91.6% = ₹4,580 per gram
- Calculate the total value of gold pledged:
Value of 50 grams of 22-karat gold: ₹4,580 x 50 grams = ₹2,29,000
- Apply the LTV ratio:
LTV ratio: 75%
Maximum loan amount: ₹2,29,000 x 75% = ₹1,71,750
- Calculate the gold loan rate per gram:
Loan rate per gram: ₹1,71,750 ÷ 50 grams = ₹3,435 per gram
Current trends in today’s gold loan rate per gram
The gold loan rate per gram fluctuates based on the factors mentioned earlier. To get the most accurate and up-to-date information, borrowers should check with multiple lenders and use online resources. Many banks and financial institutions provide tools to check the current gold loan rate per gram on their websites. Before To find the best gold loan rates, Download Bajaj Finserv App and explore the latest offers.
Here are some useful tips for borrowers to maximise their gold loan benefits:
- Compare lenders: Shop around and compare the gold loan rates per gram from different lenders. This can help you find the best rate and maximize your loan amount.
- Check the LTV ratio: Opt for lenders offering a higher LTV ratio to get a higher loan amount for the same quantity of gold.
- Negotiate terms: If you have a good credit history or an existing relationship with the lender, try negotiating for better terms, such as lower interest rates or higher LTV ratios.
- Understand the fine print: Read the loan agreement carefully, including the terms and conditions, interest rates, repayment schedule, and any additional charges.
- Use an EMI calculator: An EMI calculator for gold loans can help you estimate your monthly repayments based on the loan amount, interest rate, and tenure. This can assist in planning your finances and ensuring timely repayments.
Above all, Understanding the factors that determine the gold loan rate per gram is crucial for borrowers seeking to maximise their loan amount and secure favourable terms. By staying informed about the current market price of gold, the purity of your gold, and the policies of different lenders, you can make informed decisions and get the best possible deal on your gold loan. Using tools like an EMI calculator for gold loans can further help in planning your finances effectively.
