Gold Loan Calculator

A loan against gold is among the oldest forms of borrowing: you leave jewellery with a lender and receive cash, and you get the jewellery back when you repay. It is fast and needs little paperwork because the gold is the security. How much you get depends on how much pure gold your ornaments hold, what the lender thinks it is worth, and the fraction of that value the lender is willing to advance. This page calculates those steps and the cost of the loan.

From jewellery to value

Enter the weight of the ornaments in grams, ignoring stones, and choose the karat. Each karat has a hallmark fineness, the parts of pure gold per thousand: 24 karat is 999, 22 karat 916, 18 karat 750 and 14 karat 585. The value is the weight × the price of 24 karat gold per gram × fineness ÷ 999. Enter the 24 karat price your lender uses, which may differ from the market rate printed in a newspaper, and the page does the adjustment for purity.

Loan-to-value

The lender advances only a share of the value, the loan-to-value ratio, so that a fall in the gold price does not leave the loan unsecured. The regulator sets a ceiling and lenders usually stay under it, so confirm the figure with yours; the sample uses 75 percent. The loan amount is value × loan-to-value. A lender may also round the amount or limit it to a scheme maximum.

A worked example

The default is 50 grams of 22 karat jewellery at a 24 karat price of 7,500 a gram. The pure gold content is 45.80 g, the value is 3,43,844, and at 75% the loan is 2,57,883. With interest at 10% for 12 months paid monthly and the principal at the end, you pay 2,149.02 a month and then 2,57,883. Interest over the year is 25,788, the processing fee at 0.5% is 1,289, and the total cost of borrowing is 27,078. The gold price at which the loan equals the value of the gold is 5,625 a gram. In the second sample, 24 monthly instalments at 11% are 12,019.36 each, with 30,582 of interest.

Three ways to repay

With interest paid monthly and the principal at the end, you pay interest on the full loan throughout. With equal monthly instalments, the balance falls and so does the interest, which is cheaper per rupee borrowed over a long term but needs a higher monthly outflow. With everything paid at maturity, interest is simple and paid once with the principal, which is easy to plan but means a large single payment. The page shows the repayment and the total cost for each.

The price that matters

The last result is a safety margin. If the gold price falls from 7,500 to 5,625 a gram, the loan equals the value of the gold. Lenders act well before that point, so the margin is really a warning, not a limit. A lower loan-to-value gives more room. If you borrow a smaller amount against the same gold, the margin gets wider.

Edge cases

Weight must be above zero and the loan period can be up to 120 months. A loan-to-value of 100 is accepted, although lenders do not offer it. A processing fee of zero is allowed. Interest rates differ between lenders and may be tiered by loan size.

Limits

Valuation charges, storage and insurance fees, late-payment penalties and changes in the lender’s rate during the loan are not included. The lender’s own valuation decides the actual loan, so treat the result as an estimate before you visit.

Related tools

• Gold Price Calculator shows what a piece of jewellery costs to buy, including making charges.
• Sovereign Gold Bond Calculator covers holding gold without keeping physical jewellery.
• Simple Interest Calculator explains the interest style used by maturity-payment loans.
• Loan Calculator shows the EMI schedule for loans repaid in instalments.