Best Gold Ornaments for High-Value Loans

Last Updated: 11 Oct 2024

The oeuvre of finance and investment has always revered gold for its stable and intrinsic value. Among the plethora f ways that are available to leverage the worth of precious metals, a gold loan serves as the most popular avenue, especially for individuals looking for convenient and quick access to funds.

Considering the value of gold ornaments in the context of gold loans, not all gold ornaments are created equal. There are some types of gold ornaments that entertain a more excellent value per gram than others, thereby making them an attractive option for both lenders and borrowers.

This article will delve deep into the different factors affecting gold loan value per gram as per gold purity and determine what type of gold ornaments offer the highest value per gram for gold loans.

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What Are Gold Loans?

Gold loans are a kind of secured loan where individuals can borrow money from a financial institution by leveraging their gold ornament as collateral. During an emergency, gold loans offer the best way to meet immediate financial requirements, especially for the convenience and ease that it provides.

Moreover, compared to other kinds of loans, such as business or personal loans, the interest charged for gold loans is much more favourable, making it an affordable option.

How Is Gold Loan Per Gram Rate Determined?

The gold loan rate per gram typically differs from one bank to another. One of the essential factors is the gold lending regulations and norms laid out by RBI (Reserve Bank Of India). RBi, which serves as the regulatory body of finance for the country, has specified the maximum LTV (Loan-to-Value) ratio that is permissible for gold loans, which is 75%.

However, there are a plethora of factors that influence the rate of gold loans per gram, all of which are discussed below in detail:

Karat Or Purity Of Gold:

The gold’s purity is a crucial factor in determining its value. Karat serves as the measure that determines the gold’s purity. The lender checks the gold quality or its purity before finalising the gold loan or initiating its approval. The gold loan per gram rate typically depends on the evaluation of the gold’s purity.

Gold ornaments with higher purity are more valued by lenders and therefore result in higher loan amounts per gram. The manufacture of gold ornaments is done with the purity of the metal, which ranges from 18 Karat to 22 Karat.

Therefore it is quite easy to understand that an ornament with 22k gold purity will retain more value than 18K. However, it is also essential to note that while the per gram rate for a gold loan depends on the purity of the gold, the interest doesn’t vary concerning quality differences.

Loan To Value Rate:

The LTV ratio reflects the percentage of the value of the gold that the lender is willing to offer as a loan. In the simplest terms, it is the maximum gold loan per gram rate that is permitted. The lender can approve gold loans as per the LTV ratio only.

The current gold loan LTV ratio is 75%. The per gram rate for gold loan would be applied to the current gold market price for the loan approval regardless of the gold ornament’s age. However, the exact value provoked on the loan would entirely depend on the policy of the entity.

Current Market Price:

The present market price of gold is another crucial factor for determining the per-gram rate for gold loans. The fluctuations of gold price due to global economic factors, supply and demand, can regulate the prevailing market price. This is used by the lenders for calculating the gold base value.

Therefore if there is a decrease in the gold price, the sanctioned amount on a gold loan would also be lower. This may often push you to try in the unorganised market where there exists a tendency to receive a high valuation per gram, but it may also result in a debt trap for which you may even lose your gold. Therefore it is essential to approach to reliable gold loan entities only.

Attached Pieces Of Decoration:

If any additional pieces of decoration is attached to the gold ornament, like diamonds or any other precious stones, it will not affect the rate of gold loan per gram. These attached fittings would not be considered during the calculation of the gold loan per gram rate, and the amount will be approved only on the basis of the gold weight.

Gold Ornament Types That Offer The Highest Value Per Gram

Below are listed the kind of gold ornaments that retains the potential to fetch the best gold loan value per gram as per gold purity:

• Gold ornaments of 22 karats can secure the highest value in a gold loan since the level of purity is higher.
• Any extra weight of attached stones with the gold ornaments is disregarded during the evaluation of the rate of gold loan per gram. Thus if your ornament is intricately designed with such decorations, it doesn’t matter. Therefore gold ornaments without any additional decorative items can actually offer you value that is proportional to weight of the ornament directly.
• Gold ornaments having purity marking below 18 Karat would entertain a lower gold loan per rate. If the purity of the gold loan is at this range, the total approved money on the loan will be heavily impacted. If your ornaments are studded with diamond, they are typically designed on the mark of 18 Karat gold purity; therefore, your expected gold loan per gram rate would not be applicable. Moreover, the weight of those diamonds would also get deducted during the calculation of the total loan amount.

Points To Remember Before Opting For A Gold Loan:

Opting for a gold loan is undoubtedly a significant financial decision which must be carefully considered; here are some key points that you must remember:

• Make sure that you assess all your financial needs carefully by determining the reason behind the loan and whether it is the best solution.
• Determine the total loan amount that you require and see whether it satiates your needs. Consider borrowing an amount which you can repay comfortably.
• Get a clear understanding of the rate of interest that the lender is willing to offer. Research the rates offered by other lenders and negotiate.
• Determine the tenure of the loan that will suit well with the capacity of your repayment. Longer loan tenures involve an increased overall cost of interest.
• Be aware of the value of your collateral, i.e. the gold, and learn about the current market prices.
• Ensure a clear understanding of the repayment schedule of the loan, including the payment frequency and the total number of instalments.
• Ask your lender about any foreclosure, processing fees and prepayment charges.
• Check the reliability and reputation of the lender before finalising your decision.
• Look for gold insurance coverage for the entire time period while it will be in the custody of the lender.

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Conclusion:

Thus if you are looking forward to securing a gold loan against gold ornament with high gold loan value, carefully considering all these strategies will help you to make the most out of it. Being conscious and aware of the market fluctuations and their value is crucial, along with an evaluation of your financial goals to ensure that your decision aligns with your priorities as well as your financial ability.