What Are The Maximum And Minimum Limit For Availing Gold Loan?

2 min read
08 February 2024

Gold has been a valuable asset since ancient times, and its worth has not diminished over the years. Today, gold is not only a symbol of wealth and prosperity but also a convenient financing tool. One way to use gold as an financing instrument is through a gold loan. Bajaj Finance offers gold loans starting from Rs. 5,000 to Rs. 2 crore to help you manage your needs. Though the loan comes with no end-use restrictions, the maximum and minimum amount of loan you can borrow depends various factors.

Here are some of the factors that impact the value of gold loan you can get

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-karat 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. It is valued 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 up to 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 and/or weight. With Bajaj Finserv, the maximum gold loan value is limited to Rs. 2 crore, while the minimum limit for gold loan is set at Rs. 5,000.

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. It plays a vital part in calculating the EMI amount that you would pay in combination with the gold loan interest rate and repayment method for gold loan opted.

Read Also: How does the gold rate affect your gold loan

Mistakes to avoid while applying for a gold loan

Following are some common mistakes that you should 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 the 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. This 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.

Read Also: How can a gold loan help you start a small business

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Frequently asked questions

How much loan can you get for 1 gram of gold?

The amount you can get for 1 gram of gold depends on the current gold rates. To find out the latest prices and estimate your loan amount, check Bajaj Finance Gold Rate page. Stay informed for accurate details and make well-informed decisions on your gold loan.

What is the minimum time for a gold loan?

With Bajaj Finance, you can choose to pay the interest on a monthly, bi-monthly, quarterly, half-yearly, or annually basis as per your convenience. Please note that the principal amount and pending interest, if any, will be due for payment at the time of loan maturity.

How to calculate gold loan amount?

To calculate the maximum gold loan amount you can get against your gold jewellery, you can simply use our gold loan calculator.

What are the limitations of a gold loan?

While gold loans offer quick access to funds, there are some limitations. The loan amount is based on the gold's value, so the highest gold loan per gram depends on market rates. This means the maximum gold loan per gram can fluctuate, potentially limiting the funds you receive. Lenders also set a cap on the highest gold loan they offer, regardless of your gold's value. Additionally, if gold prices drop, the gold loan maximum amount per gram decreases, which can affect your borrowing capacity. Finally, failure to repay the loan can result in the loss of your pledged gold.

Importance of gold purity in gold loan limits?

The purity of gold is crucial in determining gold loan limits. Higher purity gold fetches a higher value, leading to the highest gold loan per gram. Consequently, lenders offer a higher maximum gold loan per gram for purer gold. For instance, 24-carat gold will receive the highest gold loan compared to 18-carat gold. The gold loan maximum amount per gram is directly proportional to the gold's purity. Therefore, ensuring your gold is of high purity can significantly increase the amount you can borrow against it.

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