Gold Loans are an ideal financial solution for individuals who require funds for personal, medical, or business purposes. But what many borrowers do not realise is that it is not just the weight of the gold that matters. The purity of the gold also plays a huge role. Let us understand how gold purity impacts your Loan value, how banks assess it, and how a Gold Loan calculator helps.
How does gold purity affect Loan value?
When you apply for a Gold Loan, the bank evaluates the value of the gold item you pledge. However, the Loan does not depend on the entire weight of the jewellery. Instead, the bank calculates the Loan amount based on the pure gold content in your ornament and the Gold Loan interest rate. For example, if you pledge 10 grams of 22K gold, only 91.6% of that weight is considered pure gold.
This means that the actual gold content used to calculate the Loan value is approximately 9.16 grams. If your jewellery is 18K, only 75% of its weight is pure gold, which means the value drops even further. The current market price of gold and the Loan-to-Value ratio, which is capped at 75% by the RBI, are then applied to the net pure gold content to determine your final Loan eligibility.
How does a Gold Loan calculator estimate eligibility?
A Gold Loan calculator is available online. It helps estimate the Loan amount you can expect based on the gold weight and purity. You just need to enter the weight of your gold item, the purity of your gold in karats, and the current market rate of gold.
Tips to maximise your Gold Loan value
If you want to get the highest possible Loan amount, there are a few strategies you can follow:
- Pledge gold with higher purity. Items made of 22K or 24K gold fetch more than 18K jewellery for the same weight.
- Avoid pledging stone-studded jewellery. Precious or semi-precious stones add to the weight of the ornament but do not contribute to the Loan value.
- If possible, test your gold’s purity at a local jeweller or karat metre centre before approaching a bank. You will know in advance what to expect.
- Before finalising your decision, use an online Gold Loan calculator to compare different purity levels and weights.
Conclusion
When applying for a Gold Loan, purity is more than just a technical specification. A 10-gram ornament made of 24K gold will always be valued higher than one made of 18K gold, even if both look similar. Understanding how purity influences your Loan value enables you to make more informed decisions about which items to pledge and what to expect in return.
