What Elements Go Into Valuing Gold for a Gold Loan?

India stands as one of the largest importers of gold, with purchasing gold jewellery regarded as an investment avenue offering promising returns. Often considered a financial safety net, gold serves as a reserve for unforeseen circumstances. Opting for a gold loan presents a convenient solution for accessing funds, whether for medical emergencies or business expansion. Utilising your gold ornaments as collateral, this loan avenue ensures swift processing, unlike traditional loans that may entail lengthy waiting periods for approval.

Getting a jewellery loan requires minimal documentation, and with all necessary documents and collateral prepared, loan approval is swift. Unlike unsecured loans, credit score concerns are alleviated with jewel loans, which are secured. Accessing funds for short-term financial needs is seamless, given the straightforward verification process and requirement of only KYC documents. Furthermore, when considering a gold loan, it is crucial to compare the gold loan interest rates offered by various lenders to ensure you secure the most favourable terms.

How to Decide Gold Valuation?

The valuation of gold is determined by two key factors: its purity and the prevailing market price for the precious metal. The higher the purity of the gold, the higher the loan amount you can obtain. The Reserve Bank of India (RBI) has laid down a standardised approach for evaluating the value of gold. Typically, this gold loan valuation process is carried out by an in-house team of gold appraisers. Additionally, there are various online valuation tools available that can provide you with an approximate estimate of the loan amount you may be eligible for.

The key elements that affect the gold valuation process, which in turn calculates the potential gold loan amount, are as follows:

Gold Carat: The purity or quality of the gold is a crucial factor in determining the final loan amount sanctioned for a gold loan. The purity is measured in carats. Customers can avail gold loans only against gold ornaments, excluding gold watches, gold coins or bars, gold utensils, and kundan jewellery.

Generally, gold ornaments have a purity of 22 carats or higher. When assessing the valuation of gold intended to be used as collateral, the appraisal team examines the carat value. The higher the carat value, indicating greater purity, the larger the loan amount that can be obtained.

Current Market Rate: The market rate of gold is subject to fluctuations, as it is influenced by various factors. In accordance with the guidelines set forth by the Reserve Bank of India (RBI), the calculation of the gold loan amount is based on the average rate per gram of gold over the preceding 30-day period.

Suggested Read: Stay Updated: Today's Standard Gold Rate

Stone and Gems: During the valuation process for gold ornaments, the weight of any precious gemstones or other non-gold components is excluded from the overall weight calculation. Jewellery pieces that are devoid of gemstones or other non-gold elements will typically fetch a higher valuation, as the entire weight is attributed to the gold content.

Weight: The net weight of your gold ornaments is the most crucial factor in determining the finance amount. To arrive at the final gold weight, the weight of any stones, diamonds, gems, or other non-gold components embedded within the jewellery pieces intended as collateral is deducted. Consequently, you can secure a higher credit amount with jewellery that has a greater net gold weight after excluding the non-gold elements.

Loan-to-value Rate: The loan amount you can receive against the pledged gold is determined by the loan-to-value ratio. This ratio varies across different loan schemes and is contingent upon the disbursed loan amount. The Reserve Bank of India (RBI) establishes the loan-to-value rate, which is currently set at 75% of the assessed value of the gold.

Muthoot Finance offers gold loans at affordable interest rates that enable you to address your urgent cash requirements. This secured loan facility allows you to use your gold ornaments as collateral, and the sanctioning process is expedited. If you wish to know the EMI (Equated Monthly Instalment) amount, you can utilize our online gold loan calculator.

For more information or to address any queries you may have, you can connect with our team or visit your nearest Muthoot Finance branch, where our team of financial experts will be happy to assist you. They can provide comprehensive guidance and support throughout the gold loan process.