How To Calculate Gold Loan Per Gram?
As a consumer, one’s income is often not enough to buy all the things or services one may want at a given time. While many a time this problem is solved via past savings, one also has the option of taking a short-term loan.
If one has some gold jewellery, even if it is a small ring, it can be another way one can borrow cheaply, or with a low interest rate. Gold jewellery also allows those who have a low credit score to borrow without having to get into the embarrassing situation of asking friends and family for money.
How Does Gold Loan Work?
One may be holding the yellow metal in various modes but lenders, typically, only give loans against gold ornaments.
The process is simple, with the borrowers giving their gold jewellery to a lender who stores it safely as collateral and lends against it.
How Is The Loan Amount Calculated?
The amount one can borrow against the gold jewellery depends on the purity of the gold in the ornament and the weight of the yellow metal in it.
A gold loan is usually offered against gold articles in the range of 18-24 carats.
But the most important factor in the gold loan is the weight of the gold being pledged as a collateral.
Precious stones like a ruby or a diamond studded in a gold ornament are not considered for calculating the loan. Only the weight of the gold is taken into account, as it has a standard value unlike other stones.
Secondly, lenders offer a loan that is less than the actual value of the gold being pledged as a security. This is as per regulations to provide a buffer for the lenders. For instance, if the price of gold sinks sharply, the value of the security falls and it could lead to an asset-liability mismatch for the lender.
The market value of the gold jewellery is calculated by taking the 30-day average rate of 22-carat gold. Lenders can offer a maximum loan of up to 75% of the market value of the gold, depending on the quality and weight of the gold.
There are online calculators that help borrowers know the amount of loan they can avail.
Currently, someone owning a jewellery made purely with 100 grams of 22-carat gold, which is worth over Rs 5 lakh, can get up to Rs 3.5 lakh. This means for every 1 gram of gold jewellery one can get up to Rs 3,500 via a gold loan.
Conclusion
The amount that you can avail as a gold loan by pledging gold jewellery is based on the purity and weight of the gold in the ornament. After factoring in the regulatory buffer, which allows lenders to lend only up to 75% of the actual value of gold, given the current market rates, every 1 gram of gold in an ornament can fetch a loan of Rs 3,500.
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