gold ornaments

Guide on Types of Gold Ornaments You Must Pledge for to Get the Highest Loan Value

Financial institutions like banks and NBFCs now can provide up to 75 per cent of the value of gold jewellery and ornaments, according to the RBI’s (Reserve Bank of India) announcement. This high loan-to-value or LTV ratio is targeted to ameliorate your borrowing potential to meet the financial emergencies that can throw you off guard. The high permissible LTV (loan to value) ratio for the loan against gold is to help further the households and entrepreneurs extremely impacted during the pandemic. 

Just by pledging the correct gold jewellery to the gold loan lenders like Muthoot gold loan, Manappuram Finance, Union Bank, State Bank of India, etc. you as an individual can secure a considerable loan amount with zero need for going through the stress of selling them. Just by pledging gold jewelry of the best purity i.e., 22 karats, you can get the maximum funding to deal with financial exigencies. 

What’s a gold loan?

A gold loan is a secured loan option that you as a borrower can take up by pledging gold jewelry ranging between 18 K and 24 K as a security or collateral. The loan amount sanctioned is the percentage of the gold’s current market value. Getting this kind of secured credit option is one of the simplest and quickest means to acquire funds in the course of emergencies. Due to the rising popularity of this kind of credit, most lenders now are providing gold loans at the enticing interest rates. In simpler words, as a gold loan is secured in nature, the interest rate for the same will be lower than unsecured credit options. For instance, the Muthoot gold loan offers the lowest Muthoot gold loan interest rate of 9 per cent per annum. The same is true for other lenders too. Besides this, while you are at this, note that you must know about the renewal process of a gold loan. 

How can you determine the maximum value of a gold loan?

The annual demand for gold in India has increased exceedingly. And note that, this trend does not appear to end any time soon. Various parameters are factored in when determining the disbursed loan proceeds in lieu of the gold jewellery. Lenders assess the pledged gold’s purity and weight and basis such parameters, the present market value is decided. 

As mentioned already, lenders tend to approve a maximum amount of 75 per cent of the pledged gold’s value. For example, if you pledge gold ornaments equaling Rs 4 lakh, the processed loan proceeds you would receive would not surpass Rs 3 lakh. Apart from this, the granted LTV will even be based on the loan repayment tenure, gold form, and repayment potential. From the above discussion now, it must be clear there are certain crucial factors that the lenders factor in for determining your gold loan value. Let’s discuss all of them one by one.  

Loan to value ratio 

LTV or loan-to-value ratio is assessing the lending risk conducted by the lenders before approving the secured loan. This is the percentage of a secured asset’s value that lenders can lend to you as a borrower. As the gold loan’s LTV ratio is capped at 75 per cent by the Reserve Bank of India, for the collateral equaling Rs 100, financial institutions can just offer a maximum of Rs 75. 

When the market price of the gold declines, you as a customer can pledge more gold. Here in this regard, you as an individual can take the help of an online gold loan EMI calculator to assess your loan amount loan EMI beforehand. Thus, it is crucial to know the distinct online loan options & how to get the prudent one. 

Gold purity

The purity of gold jewelry offered as security or collateral considerably affects the granted loan proceeds. The gold ornament’s quality must range between 18 K and 22 K. The presence of alloys like cadmium, copper, zinc, and silver in gold makes the metal resistant to massive damage. 

Jewelry weight pledged with a weight of 18K will be distinct from the ornament weight pledged with 22K gold. Fundamentally, you as an individual pledging 22K gold jewelry will get higher funds as compared to those pledging 18K jewelry. 

Weight of the gold

An important aspect that banks consider while disbursing the loan is the gold weight. In the case of any precious stones that are studded on the gold ornament, just the weight and purity of the gold will become the determining parameter. The precious gem value will not be taken into account. 

To estimate the exact gold value, any attachment or stone in the jewelry will be removed. Individuals can secure higher funds by pledging ornaments with a higher gold weightage. Nonetheless, you must pledge at least 10 grams of gold in the form of security to take up the gold loan. 

Gold form

As jewelry has sentimental and emotional values attached, repayment is faster. However, when you pledge your gold for the funds, you must make sure that banks hesitate to accept gold bullion or gold bars as security or collateral. 

Studded jewelry

As stated above, just the purity and weight of the gold decides the loan proceeds. Diamonds, gems studded in jewelry, or precious stones are not considered when weighing the ornament. In case they are present, then they are removed before the final measurement. 

Per gram rate 

The market rate of gold continues to fluctuate regularly as it is highly dependent on various external parameters. According to the RBI’s guidelines, lenders must take the average gold rate each gram of the past thirty days for deciding the valuation of gold. 

Other important parameters that impact your gold loan include –


Apart from the parameters mentioned above, there are other factors that decide the processed gold loan proceeds. Meeting the lender-linked eligibility parameters is crucial to qualify for the gold loan at an affordable rate of interest. However, such factors are simple to meet. To get the loan against gold, you as a borrower just require meeting the listed parameters – 

  • Your age must be over 18 years. 
  • You must have the adequate gold amount

The above two make the important parameters for availing loan against gold in dire situations. 

Rate of interest

The applicable interest rate is very important. As gold loan rates are decided based on your risk assessment, it might differ from one lender to another. Apart from this, the loan proceeds and tenure even play a crucial role in determining the applicable gold loan rate of interest. For higher loan-to-value (LTV) ratios, the risk involved for lenders is even higher. In such scenarios, lenders might charge a higher interest rate. 

However, reputed lenders of gold loans offer such funds against the fixed rate of interest, considerably lower than the interest rate that is applicable on other credit forms. Prominent leaders like Rupeek, Muthoot gold loan, etc. may offer low rates of interest on loan against gold. You as a potential borrower must make sure to conduct in-depth and proper market research before selecting any lender.

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