Gold has been treasured in Indian households for generations, not only for its cultural significance but also as a dependable store of value. When financial needs arise, pledging gold for a loan offers a reliable and swift solution. Knowing how much funding you can access based on the gold loan amount per gram helps you maximise this opportunity and meet urgent needs efficiently. This article will guide you on how to quickly calculate the gold loan amount per gram and address misconceptions around ‘no interest gold loans.’
Understanding how gold loans work
A gold loan is a secured loan where borrowers pledge gold jewellery or coins as collateral. The lender evaluates the gold’s purity and weight to determine its current market value, offering a loan amount typically up to 75% of this value, known as the loan-to-value (LTV) ratio.
Steps involved in obtaining a gold loan:
- Eligibility assessment
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- The borrower must own gold jewellery or coins with a minimum purity of 18 karats.
- Basic identification and address documents are required for verification.
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- Gold evaluation
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- The lender assesses the gold’s purity and weight to determine its market value.
- Based on this evaluation, the lender provides a maximum loan amount, usually up to 75% of the gold’s current market value.
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- Loan disbursement
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- Once the application is approved, the loan amount is disbursed promptly via bank transfer, cheque, or cash (up to a specified limit).
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- Repayment options
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- Repayment tenures range from a few months to a few years.
- Borrowers can repay through bullet payments (a single lump sum) or equated monthly instalments (EMIs).
Just download Bajaj Finserv App to submit an online application for a gold loan from Bajaj Finserv. Complete the OTP verification and enter all necessary information in the application form, including your mobile number. That’s it! It only takes a few minutes to quickly and easily check your alternatives for a gold loan based on your demands.
How to calculate the gold loan amount per gram
- Assess gold purity: The purity of your gold directly affects its value and, consequently, the loan amount. Most lenders require a minimum of 18-karat purity. Check your gold’s purity by looking for hallmark certification or visiting a trusted jeweller.
- Determine weight: Weigh your gold accurately using a jewellery scale. Coins often have weight stamped on them, but verifying through a scale will help confirm accuracy.
- Check the current market rate: Find out the current market rate of gold per gram by checking reliable sources like bullion markets or bank websites.
- Apply the LTV ratio: Calculate the potential loan amount by multiplying the gold’s market value by the LTV ratio (up to 75%).
For example, if the current market rate is Rs. 5,000 per gram, and you have 20 grams of 22-karat gold jewellery:- Market value = 20 grams * Rs. 5,000 = Rs. 1,00,000
- Potential loan amount (75% LTV) = Rs. 1,00,000 * 0.75 = Rs. 75,000
- Use a gold loan calculator
Many banks and NBFCs offer online gold loan calculators to estimate the loan amount per gram. Input the weight and purity to obtain a quick estimate.
Understanding the myth of no interest gold loan
It’s important to note that the concept of no interest gold loan is a misconception. All lenders charge interest on gold loans, as it is a primary source of revenue. However, interest rates are generally lower than those of unsecured loans due to the secured nature of gold loans.
How to obtain the best gold loan rates:
- Compare lenders: Banks and NBFCs offer varying interest rates, fees, and repayment options. Compare these aspects to find the best deal.
- Check processing fees: Some lenders offer competitive interest rates but impose high processing fees. Ensure you are aware of all associated charges.
- Evaluate repayment terms: Choose repayment terms that suit your financial capacity and cash flow patterns. Some lenders offer bullet payments or flexible EMI schedules.
- Consider prepayment options: Some lenders allow prepayment or foreclosure without heavy penalties, reducing your overall interest burden.
- Negotiate terms: If you have a good credit history, negotiate better terms or special rates with your lender.
Benefits of managing gold loans wisely
- Quick funding: Gold loans provide immediate financial assistance with minimal paperwork and swift disbursement.
- Low-interest rates: Gold loans typically have lower interest rates compared to unsecured loans.
- Flexible tenures: Choose repayment schedules that align with your financial situation.
- Retain ownership: Proper management ensures you can reclaim your gold jewellery after repaying the loan.
Conclusion
Understanding the gold loan amount per gram is crucial in leveraging your gold’s value effectively to meet urgent financial needs. While the idea of ‘no interest gold loans’ is a misconception, borrowers can still benefit from competitive interest rates and flexible repayment options. Carefully calculate your gold’s market value, compare lenders, and choose terms that best align with your financial situation. By wisely managing your gold loan, you can unlock the financial potential of your gold assets while retaining their ownership for future security.