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Understanding key factors that determine gold valuation for your loan amount
Gold has long been considered a valuable asset, and its versatility extends beyond being a precious metal to being a sought-after collateral for securing loans. Individuals who own gold and wish to obtain instant capital without selling their gold assets often explore gold loans, wherein the loan amount is determined based on gold valuations. Therefore, if you are seeking to avail a gold loan, understanding how lenders calculate the value of gold becomes crucial.
Crucial factors that impact the valuation of gold for calculating the gold loan amount include:
Gold purity
The purity of gold is a key factor in determining its value for a gold loan. Gold is measured in karats, with 24 karats representing pure gold. However, gold jewellery and ornaments are rarely made of pure gold. The purity level is assessed by analysing the gold's composition and comparing it to the standard purity levels. Most lenders offer gold loans only on 22-karat gold jewellery. Gold loans cannot be availed on other gold assets like coins, watches, utensils, and bars.
Weight of the gold jewellery
The weight of the gold is another crucial element in calculating its value for a gold loan. The weight is measured in grams. To determine the weight accurately, the gold jewellery is carefully weighed using top-of-the-line karat metres. It is important to note that the weight considered is the actual gold content and not the total weight of the item, which may include non-gold components like gemstones or other materials. The higher the weight of pure gold, the higher its value for the loan calculation.
Current gold rate
The valuation of gold for a gold loan is heavily influenced by the prevailing gold rates in the market. Gold prices fluctuate daily based on several factors, including supply and demand dynamics, economic conditions, geopolitical events, and so on. Lenders and financial institutions determine the loan amount by considering the current market price of gold.
Loan-to-Value (LTV) ratio
The Loan-to-Value (LTV) ratio is an essential component in calculating the value of gold for a gold loan. It represents the percentage of the loan amount that can be sanctioned against the value of the gold. The loan-to-value ratio, which is determined by the Reserve Bank of India (RBI), is presently set at up to 75% of the gold's value.
By using our online gold loan calculator, you can assess the value of the gold jewellery you intend to use as collateral. The calculator offers an estimation of your loan liability and the gold loan interest rate, considering either the weight of your gold in grams or the desired loan amount.
Pro-tip: Before you pledge your gold, know your options. Check your gold loan eligibility and choose the right amount and tenure.
Gold loan eligibility
Gold loan eligibility is kept simple so that borrowing becomes hassle-free for you. Since the loan is secured against your gold jewellery, the approval process is straightforward and does not involve complicated checks. This makes it one of the easiest ways to access quick funds. However, it is always suggested to understand the gold loan eligibility criteria and the required paperwork in detail before choosing this option.
Gold loan interest rate and applicable charges
Gold loans are often preferred because they come with competitive interest rates, making them more affordable compared to many other forms of credit. With Bajaj Finserv Gold Loan, you can choose to pay the interest on monthly, bi-monthly, quarterly, half-yearly or annually, helping you manage repayments better. Along with interest, there may be certain applicable charges such as processing fees, convenience charges, and stamp duty. These are clearly communicated upfront so you know exactly what to expect. By being aware of the gold loan interest rate and related charges beforehand, you can plan your loan better and avoid any surprises later.
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Bajaj Finance Limited has the sole and absolute discretion, without assigning any reason to accept or reject any application. Terms and conditions apply*.