Tips to calculate gold loan eligibility before availing a gold loan

10 Oct 2024|

1 min read |

by ICICI Securities Team

Most households gold in jewelry form in India. It can be used in different times. In times of crises like medical emergencies or in other cases where you need a lump sum amount like house renovation, travel plans, wedding, etc you may need to take a loan. Among all the loan options, one of the best options to consider is a gold loan. The gold sitting in your locker can help you get a loan at an attractive interest rate. If you are in such a situation, how can you calculate gold loan eligibility? We are going to find in this article.

How does the gold loan work?

Before we get into the eligibility, let us first understand the basics. Gold loans are a type of secured loan where gold jewelry is used as collateral. This means that if you are unable to repay the loan, the lender can seize and sell your gold to recover their funds. Let us say you have a gold necklace worth Rs 1,00,000. You take it to a lender who offers an LTV of 75%. The lender will provide you with a loan of Rs 75,000. You agree to repay the loan over six months at an interest rate of 12% yearly. Once you have repaid the loan in full, you can get your gold necklace back.

Calculate gold loan eligibility

Gold loans offer competitive interest rates and accessible eligibility criteria. If you are over the age of 18, you can apply for gold loans without providing credit scores or history. The loan amount is determined by the weight and purity of the pledged gold, with lenders often offering up to 75% of the gold's value. Due to daily gold price fluctuations, it is essential to check current rates before applying.

You can use a gold loan calculator to calculate the gold loan eligibility. To use the calculator, you need to:

Give the weight of the gold jewelry you want to put the collateral
Know the purity level (karats)
Decide the loan tenure

Based on these inputs, the calculator will tell you the maximum eligibility amount against your gold. Please note that the actual eligibility may differ slightly.

Here are some additional tips to calculate the gold loan eligibility:

Compare Interest Rates: Different lenders may offer varying interest rates. Compare offers to find the most competitive rate.
Loan-to-Value (LTV) Ratios: Understand the maximum LTV ratio offered by different lenders. A higher LTV means you can borrow more against your gold.
Additional Charges: Be aware of additional fees, such as processing fees or appraisal costs.
Interest Rates: Try to negotiate a lower interest rate, especially if you have a strong credit history or are a long-term customer.
Read Carefully: Ensure you understand all the terms and conditions of the loan agreement.

Conclusion

By following these steps and understanding the factors that influence gold loan eligibility, you can make an informed decision and secure the best possible loan terms.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

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