Gold Loan Calculator
Determine exactly how much you can borrow against your gold jewelry based on its weight, purity, and current market LTV limits.
Calculator Overview
Variables Considered
- • Adjusted Purity: Gold is almost never 100% pure in jewelry. The weight is mathematically adjusted down based on the Karat (e.g. 22K = 91.6% pure).
- • LTV Ratio: The central bank mandates maximum limits (often 75%) on how much a lender can loan against the value of the gold.
- • Amortization: We calculate standard EMI to pay down both interest and principal over the chosen months.
The Valuation Formula
The algorithm calculates your maximum borrowing power by determining the absolute pure weight of the asset and applying the risk ratio:
Value = Weight × (Karat / 24) × Price per Gram
Max Loan = Value × LTV%
Understanding Gold Loans
A gold loan is a secured loan where you hand over your gold jewelry or coins to a bank or NBFC in exchange for immediate cash. It is one of the fastest and easiest ways to access liquidity without selling your assets.
gpp_good Safe and Fast Access to Cash
Because the loan is fully secured by the physical gold you surrender, banks do not require intensive credit checks or lengthy income verifications. This makes gold loans highly accessible, with funds often disbursed on the same day. Your gold is kept securely in bank vaults and returned upon full repayment.
diamond Stones and Making Charges
When you buy gold jewelry, you pay a massive premium for "making charges" and attached gemstones. Lenders ignore these entirely. They will weigh the jewelry, subtract the estimated weight of any gems or enamel, and value only the net weight of the melted pure gold.
warning The Risk of Default
If you fail to pay your EMIs or clear the principal at the end of the term, the lender possesses the legal right to auction your gold to recover their funds. Furthermore, if the global price of gold plummets drastically during your loan tenure, the bank may ask you to pledge additional gold or pay down part of the principal to maintain the LTV ratio.
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Frequently Asked Questions
How is the maximum gold loan amount calculated?
The eligible loan amount is calculated in three steps. First, we adjust the gold weight based on its purity (e.g., 22K is 91.6% pure). Second, we multiply the pure weight by the current market price of 24K gold to find its total value. Finally, we apply the Loan-to-Value (LTV) ratio (typically up to 75%) to determine how much the bank is legally allowed to lend you.
What is Loan-to-Value (LTV) in a gold loan?
Loan-to-Value (LTV) is a risk-assessment ratio used by financial institutions. It represents the maximum percentage of your gold's total market value that the bank will give you as a loan. For example, if your gold is worth $10,000 and the LTV is 75%, the maximum loan you can get is $7,500. This protects the bank against sudden drops in gold prices.
How does gold purity (Karat) affect my loan?
Banks only lend money based on the pure gold content. 24 Karat is 100% pure, 22 Karat is ~91.6% pure, and 18 Karat is 75% pure. If you pledge 100 grams of 18K gold jewelry, the bank will only value it as 75 grams of pure 24K gold.
Do I pay EMI or a bullet payment?
It depends on your specific loan agreement. This calculator figures out a standard Equated Monthly Installment (EMI) where you pay both principal and interest every month. However, many gold loans allow a 'bullet repayment' where you pay only interest monthly, and repay the entire principal at the end of the term.
Are gemstones and making charges included in the valuation?
No. Financial institutions strictly evaluate the weight of the gold itself. Any weight from precious stones, diamonds, or enamel is subtracted, and the original 'making charges' you paid when buying the jewelry are ignored.