A gold loan is a secured loan where the applicant pledges his/her gold jewellery, coins or bullion with the lender as collateral. The loan to value (LTV) ratio of the loan varies between 60% to 75%. In other words, you can avail a loan of up to Rs.75 for every Rs.100 worth of gold you pledge. The tenure of a gold loan is also shorter than most other loans, and ranges from 1 month to 36 months.
What does Per Gram Rate for Gold Loan Entail?
When you go to a bank or other financial institution to take out a gold loan, they will typically quote you a rate in terms of grams. This is the amount of gold that they are willing to lend you for every gram of gold that you have. The interest rate on your loan will be based on the per gram rate, so it’s important to understand how this works.
The per gram rate is generally quoted in terms of the value of the gold on the open market. This means that the rate can fluctuate based on the current market value of gold. When the market value of gold goes up, so does the per gram rate. When the market value of gold goes down, the per gram rate will also decrease.
The interest rate on your loan will be calculated based on the per gram rate at the time that you take out the loan. This means that if the market value of gold goes up after you take out your loan, you’ll end up paying more interest than if the market value had stayed the same or gone down.
It’s important to keep this in mind when taking out a gold loan, as it can have a big impact on your overall costs. If you’re not sure what
Decoding Gold Loan Interest Rate
Gold loan interest rates are the fees charged by banks or NBFCs on the use of gold as collateral. The per gram rate is the rate of interest charged on the loan amount per gram of gold used as collateral. The total interest payable on a gold loan depends on the loan amount, tenure and per gram rate.
Banks and NBFCs usually charge a processing fee on gold loans, which is a one-time fee levied at the time of availing the loan. In addition to this, there is also a monthly interest charged on the outstanding loan amount. The monthly interest is calculated using the reducing balance method, where the interest is charged on the outstanding loan amount for that month.
The per gram rate for gold loans ranges from 12% to 24% per annum. The total interest payable on a gold loan of Rs.1 lakh for a tenure of 1 year at 12% per annum would be Rs.12,000. However, if the same loan is taken for 2 years at the same per gram rate, then the total interest payable would be Rs.24,000.
To calculate the total amount of interest payable on a gold loan, you can use an online gold loan calculator.
You can reclaim your pledged gold items after repaying the amount borrowed. However, until then, they will remain with your lender. This NBFC takes drastic security measures, like collecting your gold in a GPS-traceable bag from your home and depositing it in the nearest partner bank’s vault, to ensure that your property is safe and sound at all times. It even offers an insurance policy, covering the gold items should they come across any harm during this repayment tenure.
