Gold ownership has fast evolved from a luxury possession to a trading commodity with significant scope for the metal’s price and value augmentation. With high economic and cultural value attached, gold is one of the best assets to collateralize to raise funds. The minimum gold loan amount and its maximum limit varies based on different borrower and other related factors.
Here’s some important information about gold loan regarding factors that impact the value of gold loan provided by Bajaj Finserv.
Factors Determining Minimum and Maximum Gold Loan
Various factors impact the maximum and minimum gold loan value a borrower can avail. These are:
1. Current per gram rate of gold
The current value for per gram of gold is subject to market fluctuations based on commodity market volatility and other related factors. The per gram value of gold defines the underlying value of 22 Carat pure gold on the day of availing financing. It can thus impact the minimum and maximum gold loan amount.
2. Loan to value ratio
Loan to value ratio or LTV in the case of secured loans refers to the maximum financing value available as a percentage of the collateralised asset’s current market value. In the case of gold loan, the cap to maximum financing is referred to as the percentage per gram of gold. RBI caps the LTV for online gold loans at 75%, which is subject to variation under certain circumstances.
3. Loan financing limit
Each lender sets the maximum limit to the total gold loan availability which caps the financing irrespective of one’s gold ownership value and/or weight. With Bajaj Finserv, the maximum gold loan value is limited to Rs. 2 crore. Minimum limits to the gold loan amount usually depend on borrower requirements, with financing available up to as low as Rs. 10,000.
4. Weight of gold
Individual limits to gold loan availability also vary with the weight of a gold jewellery or ornament one owns. In combination with the per gram rate and LTV, it determines the ultimate gold loan availability.
It is essential to figure the affordability of this loan when determining the amount as it impacts the gold loan EMI amount you would pay in combination with the gold loan interest rate and repayment method opted.
Mistakes to Avoid While Applying for a Gold Loan
Following are some common mistakes to avoid when applying for a gold loan to secure the maximum gold loan per gram.
1. Not ensuring lender transparency in gold valuation
Accurate valuation of gold is critical to the total loan amount availability. It is important to check if a lender ensures transparency during such valuation or not to maximise availability of the total financing value.
2. Under/ overestimating gold’s value
When checking maximum loan availability, consider ensuring that you do not under or overestimate your gold jewellery’s value. Account for only the weight of pure gold in such ornament excluding any gemstone or other metal it may carry.
3. Choosing lender with a low LTV
Borrowers may end up choosing a lender who offers LTV at a much lower rate than the maximum availability in the market, which can lead to reduced loan amount availability. As per RBI norms, LTV of up to 75% is available on gold per gram.
Selecting the highest LTV thus improves your chances of maximising loan availability. Compare available lenders to determine you select the financial institution that falls in the highest slab of maximum and minimum gold loan availability.