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| June 14, 2024

6 Ways Gold Loan Rate per Gram Shape Your Gold Loan Experience

With the rate of gold rising day by day, Indians have started to realize the potential of gold jewelry stored in their homes. Gold jewelry can be leveraged in times of financial crisis, helping you get instant funds. This has led to a rise in the popularity of gold loans as a convenient solution during financial emergencies.

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A gold loan is a type of secured loan that works on a simple principle: you pledge your gold as collateral and borrow money against it. Once you repay the loan with interest you get your gold back. While factors like lower interest rates and hassle-free documentation make these loans attractive, one crucial element significantly shapes your borrowing experience the gold loan price per gram.

What is the Gold Loan Rate per Gram?

The gold loan rate per gram refers to the amount of money a lender is willing to offer you for every gram of gold you pledge as security for a gold loan. However, there are numerous factors that can impact the gold loan per gram prices today, including:

  • The market value of Gold
  • Demand and supply
  • Economic situation
  • Global Trends
  • Equation of rupee and dollar
  • Government gold reserves

6 Ways Gold Loan Rate per Gram Shape Your Gold Loan Experience

Now that you have a clear understanding of what gold loan price per gram means, here are six ways it can impact your experience when you take a loan against gold:

Loan-to-Value Ratio (LTV)

The LTV or Loan-to-Value ratio is the percentage of the gold's market value that the lender offers as a loan. While factors like gold purity influence LTV, the changes in gold rate also play a crucial role. As gold rates rise, a lender might be willing to offer a slightly higher LTV, allowing you to borrow a larger amount against your pledged gold. On the other hand, lenders may reduce the LTV ratio if the gold price falls.

Here is an example: Most lenders in India offer an LTV ratio of 75%, per RBI. So, if you pledge gold with the current value of 1 lakh, the maximum loan amount you will get will be Rs 75000. However, if the loan rate increases by 5%, the value of your gold will be Rs 1.05 lakhs. In this scenario, the LTV ratio will be Rs 78,750, allowing you to borrow a larger amount.

Interest Rates

Along with the loan amount, the gold rates also impact the interest rate you charged for gold against the loan. When the gold prices are high, the lenders may offer lower interest rates to attract more borrowers since they are confident about the value of collateral. However, when gold rates decline, lenders are more likely to offer higher interest rates to compensate for higher risks associated with loans. To calculate interest rates on gold loans, consider using tools like a gold rate interest calculator.

Loan Repayment Tenure

Fluctuations in gold prices can affect your gold loan repayment tenure. With a higher per-gram rate of gold, you get a larger loan amount, allowing you to spread the repayment over a longer term, resulting in lower monthly installments. On the other hand, a lower per-gram rate of gold will lead to a shorter repayment tenure, resulting in higher monthly installments.

Suggested Read: Why A Longer Repayment Personal Loan Is A Must-Have Choice For Everyone?

Renewing or Closing the Loan

Changes in gold rates can also influence the decision of those thinking of renewing or closing their loans. When gold prices are surging, a person might be more inclined to close the loan to benefit from the appreciated value of gold. Conversely, during a period of falling gold prices, renewing the loan at a lower LTV ratio could be a smarter move.

Suggested Read: Your Complete Guide To Gold Loan Renewal Process

Impact on Existing Loan

Fluctuation in gold rates can also impact those with existing gold loans. If the gold price dips significantly, the borrower might face the risk of their gold value not covering the outstanding loan amount. In such cases, you may need to repay some of the loan or provide additional gold to maintain the LTV.

Collateral Requirements

In terms of collateral requirements, fluctuations in gold rates significantly impact the amount of gold required as collateral for a gold loan. When gold rates are high, lenders are more likely to accept less gold as collateral, as the value of the gold is higher. Conversely, if gold rates are low, borrowers are typically required to pledge more gold as collateral to compensate for the lower market value.

Overall, the gold loan per gram price today can significantly shape your gold loan experience. By understanding the relationship between gold rates and loans against gold, you can make more informed decisions while applying for a loan and potentially get the best rates and repayment plan for yourself.

If you're looking to leverage your gold for a loan, Muthoot Finance can be a great option. We offer one of the best per-gram rates for gold loans which means that the loan amount you are eligible for becomes significantly higher. Additionally, with us, you will get competitive interest rates, easy eligibility criteria, and minimal paperwork.

Enquire Now!




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