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| May 27, 2022


India is one of the largest importers of gold, buying gold jewellery is considered an investment option that guarantees high returns. It is a reserve for those rainy days. There is always an option to take a credit against the gold jewellery or any other gold items to fund cash requirements like medical emergency, business expansion etc. Gold loan is one of the easiest ways to arrange funds as you can easily apply for a credit using your ornaments as collateral. Unlike other loans, the process is very fast and you do not have to wait for months to get your loan sanctioned.

Applying for a jewellery loan needs minimum documentation and if you have all the required documents and collaterals in place, you can get your loan sanctioned within no time. There is no need to worry about having a good credit score as the jewel loan is a secured one. You can easily get the funds to meet temporary financial glitches as the process is very easy for gold loan verification and you only need to produce the KYC documents. Another reason for the popularity of gold loans is, this financing option comes with easy repayment with EMIs (Equated Monthly Installments).

How to decide gold valuation?

The value of gold is calculated on the basis of its purity and the current market rate of the precious metal. The purer the gold is, the higher amount you can get as a loan. As per the RBI guidelines, a standard method needs to be followed to determine the value of gold. Generally, the valuation is done by an in-house gold valuation team. And there are a few online valuation mechanisms as well that you can use to find out the approximate loan amount which you can apply for.

Important factors that affect the gold valuation to calculate the gold loan amount are:

  • Gold Carat: The quality of gold is an important factor to calculate the final amount to be sanctioned in a gold loan. The purity of gold is measured in Carat. Customers can opt for Gold Loan on Gold Ornaments only, excluding Gold watches, Gold Coins or Bars, Gold Utensils, Kundan.

    Generally, gold ornaments contain from 22 carat and above. While deciding the valuation of gold you want to use as collateral, the valuation team checks the carat value. The higher the carat value is, the higher the loan amount you can get.

  • Loan-to-value Rate: This implies the loan amount you can get against the gold you have pledged. It depends on the loan amount disbursed and can vary from scheme to scheme. The loan-to-value rate is decided by RBI and it is currently set at 75% of the gold value.

  • Current Market Rate: The market rate of gold keeps fluctuating as it depends on different factors. As per the RBI guidelines, the average rate of the last 30 days of per gram rates of gold while calculating the amount of gold loan.

  • Stone and Gems: While checking the value of gold ornaments, any precious gems or stones are not included in the overall weight. If you have jewellery that does not have any gems or stones, it will have a higher value.

  • Weight: The weight of your gold ornaments is the most important factor to decide the finance amount. The final weight of gold is calculated by removing the weight of any stones, diamonds, gems etc. that are included in the ornaments that you want to keep as collateral. You can get a higher credit amount with jewellery that weighs more.

You can fund your urgent cash requirements with the help of gold loan schemes offered by Muthoot Finance. It is a type of secured loan where you can use your gold ornaments as collateral and the sanctioning process takes no time.

If you want to check the estimated EMI amount, you can use our gold loan EMI calculator. To know more, visit your nearest Muthoot Finance branch and our team of finance experts will help you with any query you might have.

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