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Understanding Gold Loan Calculation
Gold loan calculation involves three key factors: gold weight and purity, current gold price, and the loan-to-value (LTV) ratio. Unlike other loans, the amount you can borrow directly depends on your gold's value.
How Gold Loan Amount is Determined
| Factor | Impact on Loan |
|---|---|
| Gold Weight (grams) | Higher weight = Higher loan |
| Gold Purity (karats) | 22K valued higher than 18K |
| Current Gold Rate | Market price determines value |
| LTV Ratio | 75% max as per RBI (banks can offer less) |
Gold Loan Calculation Formula
Loan Amount Formula
Loan Amount = Gold Weight � Purity Factor � Gold Rate per Gram � LTV%
Example: 50 grams of 22K gold, gold rate Rs. 6,000/gram, 75% LTV
= 50 � 0.916 � 6,000 � 0.75 = Rs. 2,06,100
Purity Factors:
| Karat | Purity | Factor |
|---|---|---|
| 24K | 99.9% | 0.999 |
| 22K | 91.6% | 0.916 |
| 20K | 83.3% | 0.833 |
| 18K | 75.0% | 0.750 |
EMI Calculation for Gold Loan
Standard EMI formula applies:
EMI = [P � R � (1+R)^N] / [(1+R)^N � 1]
Example:
Loan: Rs. 2,00,000 | Interest: 10% p.a. | Tenure: 12 months
Monthly Rate (R) = 10/12/100 = 0.00833
EMI = [2,00,000 � 0.00833 � (1.00833)^12] / [(1.00833)^12 � 1]
EMI = Rs. 17,584 per month
Gold Loan Interest Rates Comparison
| Lender | Interest Rate | Max LTV | Processing Fee |
|---|---|---|---|
| Muthoot Finance | 12% - 26% | 75% | 0.25% - 1% |
| Manappuram | 12% - 24% | 75% | 0.5% - 1% |
| SBI | 8.75% - 11% | 75% | 0.50% |
| HDFC Bank | 10% - 16% | 75% | 1% |
| ICICI Bank | 10% - 18% | 75% | 1% |
Types of Gold Loan Repayment
1. Regular EMI
Pay principal + interest monthly. Standard option with predictable payments.
2. Bullet Repayment
Pay only interest monthly, principal at end. Lower monthly outgo but higher total cost.
3. Overdraft Facility
Interest charged only on amount withdrawn. Ideal for business cash flow needs.
4. Upfront Interest
Full interest deducted upfront, lower amount disbursed. Get gold back after principal repayment.
Loan Amount by Gold Weight
Assuming 22K gold at Rs. 6,000/gram, 75% LTV:
| Gold Weight | Gold Value | Max Loan (75% LTV) |
|---|---|---|
| 10 grams | Rs. 54,960 | Rs. 41,220 |
| 25 grams | Rs. 1,37,400 | Rs. 1,03,050 |
| 50 grams | Rs. 2,74,800 | Rs. 2,06,100 |
| 100 grams | Rs. 5,49,600 | Rs. 4,12,200 |
| 200 grams | Rs. 10,99,200 | Rs. 8,24,400 |
Factors Affecting Your EMI
- Loan Amount: Based on gold weight and purity
- Interest Rate: Banks lower than NBFCs
- Tenure: Usually 3 months to 36 months
- Repayment Type: EMI vs Bullet vs Overdraft
Frequently Asked Questions
Maximum is 75% of your gold's current market value (per RBI rules). This is called Loan-to-Value (LTV) ratio. If your gold is worth Rs. 10 lakhs, maximum loan is Rs. 7.5 lakhs.
Yes, but only the gold part is valued. Stone weight is deducted. Pure gold ornaments without stones get higher loan amounts. Some lenders may reject heavily studded pieces.
If gold price falls significantly, lender may ask you to either pledge more gold, make partial repayment, or the LTV breaches limit triggering margin call. This is rare in short tenures.
Yes, but loan amount will be lower as 18K gold has only 75% purity compared to 91.6% for 22K. Most lenders accept 18K to 24K gold. Below 18K is usually not accepted.
Conclusion
Gold loan calculation is straightforward once you understand LTV ratio and gold valuation. With quick processing and minimal documentation, it's an excellent option for emergency funds. Use our calculator to determine your eligible loan amount.
Use our Gold Loan EMI Calculator to calculate your loan eligibility!