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The gold loan has been the best way to meet financial requirements in an emergency scenario. The loan against gold business has increased manifold in recent years. The flagging business situation, due to the prevalent pandemic, has been the predominant factor in the increase of gold loans. Furthermore, the interest of gold loans has been favorable for the borrower compared to personal and business loans.
People found it better to opt for gold loans instead of other more demanding finance schemes and loans. Low-interest rate of gold loan, minimal paperwork since the gold is pledged in the case of loan against gold, and quick disbursement have also been instrumental in making gold loan the preferred option.
Gold loan per gram rate would differ according to the bank or NBFC you approach for the loan against gold. A noteworthy factor is that the Reserve bank of India has laid out the gold lending norms. The RBI, the Central Bank and financial regulatory body of the country, has stipulated that the maximum permissible loan to value (LTV) ratio for gold loans at 75%.
It may be noted that there are many factors that decide the gold loan per gram rate. Besides this, you may confirm the interest of the gold loan before finalizing the financer. The elements that result in reduced value on loan against gold are the quality of gold, the extant regulations in the NBFC or bank providing the gold loan, and the present gold price.
On the other hand, the borrower must examine the entities offering loan against gold, to choose the best one. The interest of the gold loan, the gold loan per gram rate, and other relevant aspects must be considered prior to choosing the gold loan lender.
We would be elaborating the comprehensive details on loan against gold or gold loan, gold loan per gram rate, the interest of gold loan, the type of gold ornament that give the highest value per gram on gold loans, etc.
How is the Valuation of the Gold Ornament Undertaken?
India continues to be among the top five nations that import gold. We have been exhibiting an affinity towards gold ornaments for centuries. Besides being a precious metal that amplifies one’s beauty and dignity, a loan against gold or a gold loan is the best method for investment. It also renders a sense of financial security to the individuals.
In addition to all the above, the possibility of a loan against gold makes it a sensible decision to invest in gold. Leading financial firms like Manappuram Finance offers online gold loan facility as well. Moreover, they offer diminishing balance interest in a gold loan. Such futuristic steps help individuals to obtain money at any time of the day (24x7) in case of emergency needs.
The lender would examine the gold to confirm the purity and ascertain the value. The gold loan per gram rate would directly depend on the assessment by the experts at the NBFC or bank. The interest on gold loans would be according to the policies laid down by the financer.
Lets’ see the factors that affect the gold loan per gram rate in detail.
1. Karat
Karat is the measure that denotes the purity of gold. Any financer that provides gold loan would check the quality and purity of gold before approving the gold loan. The gold loan per gram rate on loan against gold would be based on the evaluation. Typically, the purity of gold ornaments is from 18 Karat to 22 Karat. As you can understand, the loan against gold with 22K gold would fetch you more value than 18 K gold. The interest of gold loans would not vary with respect to differences in quality. At the same time, the laid down policies of the specific financer would be the determining factor in this regard.
2. LTV
The Loan to Value Rate or LTV ratio is the maximum permissible gold loan per gram rate. The NBFC or the bank can approve a loan against gold according to the LTV ratio only. The present LTV ratio for gold loans is 75%. The gold loan per gram rate would be applied on the present market price of gold, for approving the gold loan amount, irrespective of the age of the gold. Even though the lender can give up to 75%, the exact value given on a loan against gold would depend directly on the entity’s policy.
3. Current Price
The gold loan amount is calculated on the current market price of gold. Therefore, the amount sanctioned on loan against gold would be lower if the price has fallen. You may get a high gold loan per gram rate than the existing values in the unorganised market, nevertheless, the interest of gold loan would be way higher than acceptable. It can result in a debt trap, in turn, you may lose your gold forever. This underscores the fact that you must approach only a reliable entity for a gold loan. Further, the interest of a gold loan would be favourable with reputed NBFCs and banks.
4. Additional Decorations
The additional decorative pieces including precious stones such as diamonds would not increase the gold loan per gram rate or the approved amount on the gold loan. Yes, the extra fittings would be simply disregarded whilst calculation the gold loan per gram rate. The amount approved and interest of loan against gold would solely on the weight of gold. None of these elements affects the interest of a gold loan.
Type of Gold Ornaments that Give Highest Value Per Gram
You can expect a higher value, on loan against gold, when the mortgaged gold is of high quality. The type of gold ornaments that can fetch the highest value per gram on gold loan are:
• Gold ornament or gold asset of 22 karats or more can get you the maximum value on a gold loan. The interest of gold loan is not related to purity, many a time.
• The weight of diamonds and stones is not considered for evaluating gold loan per gram rate. Therefore, the weightage of those doesn’t matter at all. The gold without any such additional items can get you the value directly proportional to the weight. The interest of gold loan does not change in any case.
• The gold ornaments or gold property of purity of 18 karats or below would have a reduced gold loan per gram rate. The total money approved on the loan against gold would be impacted if the purity of the gold is in this range. Note that, diamond-studded gold ornaments are normally designed on 18 karat gold. Hence, the gold loan per gram rate on those would not be as much as you expect. In addition, the weightage of the diamond would be deducted for calculating the gold loan amount.
What are the Things to Consider Whilst Taking a Gold loan?
The gold loan is the best method to resolve a financial crisis at home or business. However, you must be cautious enough to avoid a debt trap. A loan against gold must be taken according to your calculated financial capacity only. Since the interest of the gold loan is comparatively less, people tend to take a high amount pledging gold. It is not a good sign. Take only the required amount and mortgage the requisite gold after calculating the gold loan per gram rate.
Online gold loan is another advisable alternative for meeting urgent fund requirements. In this case, the gold would be held in the locker of the NBFC and the borrower can apply for a loan against gold through the website or the mobile app.
Do you have any queries regarding loan against gold, the interest of gold loan, gold loan per gram rate, or anything else?
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