Gold Loan Calculator Guide: How to Calculate Gold Loan Amount, Interest & LTV

The gold loan amount is determined by the market value of the gold pledged, reduced by the lender's LTV ratio.

Step 1: Calculate net gold weight • Weight of gold ornament includes metal alloys and stones • Lenders assay (test) the purity and calculate net gold weight • Net gold = gross weight × (karat ÷ 24) • Example: 20g ornament at 22 karat: 20 × (22/24) = 18.33g pure gold content

Step 2: Find current gold price • Gold prices are quoted per 10 grams (India) or per troy ounce (international) • Use the gold rate on the day of the loan application • 1 troy ounce = 31.1 grams

Step 3: Calculate market value • Market value = net gold weight × gold price per gram • Example: 18.33g × ₹6,200/g = ₹1,13,646

Step 4: Apply LTV ratio • Maximum LTV: 75% (RBI cap for NBFCs and banks in India) • Loan amount = market value × LTV • Example: ₹1,13,646 × 75% = ₹85,234 maximum loan

• Net gold = gross weight × (karat ÷ 24) — e.g., 22K ornament: × 22/24 = 91.67% pure
• Market value = net gold weight × gold rate per gram
• Maximum LTV: 75% of market value (RBI regulation for India)
• Loan amount = market value × LTV ratio

Gold purity is measured in karats, where 24 karat = 100% pure gold. Jewelry is typically alloyed with other metals for durability.

Common jewelry purity levels: • 24K = 99.9% pure (coins and bars — rarely used for jewelry) • 22K = 91.67% pure (most Indian jewelry; standard for gold loans) • 18K = 75% pure • 14K = 58.3% pure • 10K = 41.7% pure (minimum karat accepted by most lenders)

Hallmarked gold: Bureau of Indian Standards (BIS) hallmarking certifies purity. Hallmarked gold gets better loan rates because purity is verified.

Lenders' acceptance policies: • Most banks accept 18K to 24K gold • Some NBFCs accept as low as 14K • Gold coins accepted (typically limited to bank-issued coins up to 50g) • Stones and non-gold components are deducted from assessable weight • Manufacturing charges/making charges are NOT considered in loan valuation

BIS 916 hallmark: Indicates 22 karat (91.6% purity) — the most common hallmark for Indian jewelry used in gold loans.

• 22K (91.67% pure): most common jewelry karat for gold loans in India
• BIS hallmarked gold gets better loan terms — purity is certified
• Making charges, stones, and non-gold components excluded from valuation
• Minimum accepted: 18K by most banks; some NBFCs accept 14K

Gold loan interest rates vary by lender, loan tenure, and loan amount:

Typical interest rates (India, 2024–2025): • Banks (SBI, HDFC, Axis): 8.5%–11% per annum • NBFCs (Muthoot Finance, Manappuram): 12%–24% per annum • Cooperative banks: 10%–14% per annum

Interest calculation methods:

1. Flat rate interest: • Interest = Principal × rate × time • All interest calculated on original principal • Effective rate is higher than nominal rate

2. Reducing balance (diminishing): • Interest on outstanding principal only • Common for term loans

3. Bullet repayment: • Common for gold loans • Pay entire principal + interest at end of tenure • Total interest = P × r × n

Example: ₹1,00,000 gold loan at 12% for 12 months, bullet repayment: • Monthly interest = ₹1,00,000 × 12% ÷ 12 = ₹1,000/month • Total interest for 12 months: ₹12,000 • Repayment at maturity: ₹1,12,000

• Banks: 8.5–11% pa | NBFCs: 12–24% pa (higher rate, faster processing)
• Bullet repayment: no EMI — pay principal + all interest at end of tenure
• Total interest = Principal × annual rate × (months ÷ 12)
• Flat rate vs. reducing balance: flat rate has higher effective cost

Gold loan eligibility is straightforward compared to personal loans:

Eligibility: • Age: 18–70 years (varies by lender) • Residency: Indian resident • Gold ownership: must be the owner of gold pledged • No income proof required in most cases • No credit score requirement (secured loan)

Documents required: • Identity proof: Aadhaar card, PAN card, passport, or voter ID • Address proof: utility bill, Aadhaar, or bank statement • Photographs • Gold ownership documents (optional but helpful)

Loan tenures: • Typically 3 months to 24 months • Some lenders offer overdraft/bullet repayment • Renewal/rollover available at maturity

Foreclosure: • Most lenders allow early repayment without penalty • Foreclosure charges: nil to 1–2% • Gold released immediately upon full repayment

• No income proof or credit score required — gold is the collateral
• Required documents: ID proof + address proof + photos only
• Tenures: 3–24 months | Bullet repayment common (no monthly EMI)
• Gold returned immediately after full loan repayment

Key factors to compare when choosing a gold loan lender:

1. Per gram loan rate: Different lenders offer different amounts per gram based on their LTV and gold valuation methodology.

2. Interest rate: Compare effective annual rates — NBFC rates can be 2× bank rates.

3. Processing fees: 0% to 1% of loan amount

4. Storage/locker security: Is gold stored in a branch vault or centralized? Is storage insured?

5. Disbursal speed: NBFCs can disburse in 30–60 minutes; banks typically take 1–2 hours with more documentation.

6. Repayment flexibility: Can you pay monthly interest only? Are partial payments allowed?

7. Auction risk: If you default and can't repay, the lender auctions your gold. Understand the auction timeline (usually 3 notices over 30–90 days before auction).

Major lenders comparison: • SBI Gold Loan: 8.5–9% pa, government bank security, slower process • HDFC Bank: 9–11% pa, branch-based, reliable • Muthoot Finance: 12–24% pa, fastest (30 min disbursal), highest rates • Manappuram Gold Loan: 12–24% pa, flexible tenure, quick • IIFL Finance: 10–18% pa, mid-range option

• Compare per-gram rate, interest rate, processing fee, and disbursal speed
• Banks are cheaper (8–11%) but slower; NBFCs are faster (30 min) but expensive (12–24%)
• Understand auction risk: gold auctioned if you default after notice period
• Storage security: confirm gold is insured and stored in secure vault

Comparing gold loans and personal loans for the same amount:

Gold loan advantages: • Lower interest rate (often 8–12% vs. personal loan 12–24%) • No income proof or credit score needed • Faster approval (30 minutes to 2 hours) • Higher loan amounts possible (based on gold value, not income) • Shorter processing, minimal documentation

Gold loan disadvantages: • Risk of losing gold if you default • Need to physically have gold to pledge • Shorter tenure (max 24–36 months) • Cannot access pledged gold during loan tenure

Personal loan advantages: • No collateral risk • Longer tenures (5–7 years) • Available without gold assets

Decision framework: • Have gold and need quick cash for short term? Gold loan wins. • Need money for 3–5 years without collateral risk? Personal loan better. • Excellent credit score (750+)? Personal loan rates become competitive. • Emergency within hours? NBFC gold loan is fastest option available.

• Gold loan: lower rates, faster, no credit check — but gold is at risk
• Personal loan: no collateral risk, longer tenure — but higher rates and slower
• Gold loan best for: short-term need, quick cash, low credit score situations
• Personal loan better for: long tenure needs, borrowers without gold assets