Gold loans have become a popular method of raising capital in recent years. It’s an easily accessible and convenient way to secure funds by pledging gold ornaments and jewellery.
Lenders offering the gold loan scheme consider several factors before determining the maximum loan amount that they can offer against your gold. In this article, we take a closer look at the parameters that lenders use while calculating the maximum gold loan per gram.
Gold Loan Advantages
Before discussing the parameters, let us take a look at some of the advantages of a gold loan:
- Low-Interest Rates
Gold loans come with lower interest rates when compared to most personal loans. The rate of interest depends on the loan amount and the lender’s policies. Since the lender can secure the loan against gold, they will often offer lower interest rates than personal loans which are unsecured.
- Simple Documentation
Getting a gold loan is an uncomplicated process that requires minimal documentation. All one needs to submit is an ID proof, address proof, and an affidavit stating that the gold belongs to you. Once the documents are verified, lenders will immediately disburse the funds.
- No Credit Check Required
In general, lenders do not check the applicant’s credit score when it comes to gold loans, which means that you can apply for one even if your credit score is low.
- Quick Processing Time
Since gold loans require minimal documentation and no credit checks, the processing time is significantly faster. Lenders will disburse funds immediately after verifying the authenticity and value of the gold ornaments pledged one of the best gold loan advantages available
How do lenders determine the maximum gold loan per gram?
The maximum gold loan per gram that a lender can offer depends on several factors. Lenders weigh these factors to determine the maximum amount of loan they can offer. Here are the primary factors that lenders consider while determining the maximum gold loan:
- Purity of Gold
The purity of the gold pledged is one of the essential factors taken into account while deciding the maximum gold loan. The higher the carat value of the gold, the higher the loan amount that you can expect. Gold loan lenders generally offer higher loan amounts against 22 karat and 24 karat gold.
- Gold Weight
The weight of the gold jewellery pledged equals to the gold’s value. Keeping this in mind, lenders determine the loan amount that can be offered for some standard weights. Usually, the minimum weight that lenders accept for a gold loan is ten grams.
- Prevailing Gold Rate
The loan amount that can be availed also depends on the existing gold rate at the time of the loan application. Since gold prices fluctuate frequently, lenders take into account current gold rates to calculate the loan amount that can be offered.
- Loan to Value (LTV) Ratio
The loan-to-value ratio is another crucial factor that lenders take into account while determining the loan amount. It explains the maximum amount of money that you can avail of against the gold pledged. Usually, banks and NBFCs offer LTV ranging from 60% to 75% of the UK hallmarked gold value and 65% to 90% of the non-hallmarked gold value.
- Reputation of the Lender
The reputation of the lender also plays a role in determining the maximum gold loan amount that they can offer. If the lender is known for offering competitive rates and flexible terms, borrowers can expect better returns for their gold.
Conclusion:
While considering a gold loan, it’s essential to do a comparative analysis of the maximum loan amount that can be offered by different lenders. Multiple factors play a vital role in determining the maximum gold loan per gram that can be availed. Choosing a lender with good customer service, reasonable interest rates, and flexible repayment terms is crucial to get the most out of your gold loan. So, before availing of a gold loan, explore and research all of the options in the market to get the best deal possible.
