How Is The Valuation Of Gold Decided For Gold Loan

When it comes to gold valuation for a loan, the sanctioned amount is subject to the purity of the gold and existing gold rates. Click here for more information.

17 Dec,2022 18:11 IST 3692 Views
How Is The Valuation Of Gold Decided For Gold Loan

Anything made out of gold in India has immense value. However, gold owners who want to raise immediate capital without selling the gold articles consider gold loans where the amount is based on the gold valuations online.

Hence, if you are looking to avail of a gold loan, it is important to know about the process of deciding gold loan valuation.

What Are Gold Loans?

Gold loans help raise adequate capital for covering various expenses. Lenders, while giving a gold loan, require pledging gold articles with the lenders, which they keep in safe vaults. The lenders provide a certain percentage of the gold valuation for gold loan as the loan amount that they analyse based on the current market value of the gold in the domestic market.

Lenders return the gold articles pledged as collateral to the borrowers once the borrowers repay the gold loan amount in full. Like other types of loan products, lenders provide the gold loan amount based on the gold valuation for gold loan with an interest amount. The borrower is liable to repay the gold loan principal amount along with interest to the lender within the loan term.

What Is Gold Loan Valuation?

When customers buy gold from the domestic market, the jeweller sells the gold ornament based on the current gold price prevailing in the market that day. The gold prices fluctuate on a regular basis based on numerous domestic and international factors.

Lenders follow the same process of fluctuating gold prices while providing a gold loan, as the RBI allows them to give only a percentage of the gold valuation for gold loan as the loan amount. The percentage, called the Loan-To-Value Ratio, is the loan amount lenders offer a borrower after ascertaining the current value of the gold articles. Currently, the Reserve Bank of India allows all lenders to have an LTV ratio of 75%. The LTV means that if the gold valuations is Rs 1,00,000, the lenders can offer 75% of the gold valuation for gold loan, which is Rs 75,000 as the gold loan amount.

Since gold prices fluctuate daily, they heavily influence the gold valuation for gold loan. Based on the LTV ratio, the higher the gold loan valuation, the higher the gold loan amount you will receive from the lender.

How Is The Valuation Of Gold Decided For A Gold Loan?

Lenders do not constantly look at the gold valuation online as gold prices are always fluctuating. However, they analyse the gold valuations for the pledged gold articles when the gold owner applies for a gold loan with the lender. On the day the borrowers submit the gold loan application form and provide gold articles to the lenders for collateral, lenders examine the gold valuation online as an average of the last 30 days. Afterwards, they consider the following factors in deciding the gold valuation for a gold loan:

• Gold Carat

Karat, carat, or ‘K’, is a measuring unit for the quality of the gold and its pieces, such as gold bars, coins, jewellery, etc. In India, gold articles are measured through a karat scale which ranges from 0-24.

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Zero karats would be a fake gold ornament, while 24 carats is the highest possible quality. The karat measures the ratio in which different metals are mixed with gold. The higher the carats, the higher the gold loan valuation.

• Current Gold Prices:

Gold prices change daily depending on several market factors. However, RBI has set a rule that the lender must calculate the average of the gold prices in the last 30 days to determine the gold valuation for a gold loan. It ensures that the provided loan amount based on the LTV ratio does not create a significant change in the gold loan amount.

• Demand and Supply

If the demand for gold is higher than the supply, the price of gold increases. On the other hand, if the supply is higher than the demand, the price of gold decreases. You may get a higher gold loan with a higher price as the gold valuations will be higher. However, the gold loan amount will decrease if the current market gold price is lower.

• Quality

The gold loan valuation depends highly on the quality of the gold as the prices differ for different gold grades. For example, if you have 22k gold, the gold valuation for a gold loan will be lower than the gold valuations of gold articles having a quality of higher carats. Hence, with a high gold quality, the gold valuation will be higher, resulting in you getting a higher gold loan amount.

• Interest Rates

India's apex bank, the Reserve Bank Of India, manages the money flow in the market by increasing or decreasing the key interest rates such as repo rate and reverse repo rate. The prevailing interest rates also affect the gold prices and in turn, the gold valuation for gold loans.

Such interest rates have an inverse relationship with domestic gold prices. People prefer to buy gold when the interest rates decrease, thereby increasing the demand and the prices, resulting in higher gold valuation and gold loan amounts.

Avail Of An Ideal Gold Loan With IIFL Finance

With IIFL Gold loan, you get industry-best benefits through our process designed to offer instant funds based on the value of your gold. IIFL Finance Gold Loans come with the lowest fee and charges, making it the most affordable loan scheme available. With a transparent fee structure, there are no hidden costs you have to incur after applying for the loan with IIFL.


Q.1: How can I apply for a Gold Loan with IIFL Finance?
Ans: Getting a gold loan from IIFL Finance is super easy! Click on the ‘Apply Now’ button mentioned above and fill in all the required details to get a loan approved infew5 minutes.

Q.2: What are the interest rates on IIFL Finance Gold Loans?
Ans: The interest rates on IIFL Finance gold loans are between 6.48% - 27% p.a.

Q.3: Is the pledged gold kept safe during the loan tenure?
Ans: Yes. IIFL Finance keeps the pledged gold utmost safe in steel-hardened safety vaults with 24/7 security surveillance. Furthermore, the pledged gold is backed by insurance to reimburse the borrower in case of theft.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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