Last Updated on April 20, 2023 by Tabraiz
If you’ve been unable to pay off your loan on time and have been refused by your lender, you may wonder how to get your gold ornaments back. Fortunately, a solution to your problem is that pledging your gold ornaments to a bank will get you a considerable loan amount. The key is to choose gold ornaments of the highest purity possible, as this will ensure that you get the maximum amount of money back.
According to the Reserve Bank of India, financial institutions can now lend up to 75% of the value of gold jewelry. This high LTV (loan-to-value) ratio is intended to boost people’s borrowing ability to reduce financial difficulties that might catch anyone unaware. The high allowable loan-to-value ratio for loans against gold jewelry would help even more enterprises and households affected by the COVID-19 epidemic.
Individuals might acquire a considerable loan amount by promising the appropriate gold jewelry without having to sell them. One can obtain the most finances for dealing with financial problems by promising gold jewelry of the most excellent purity, i.e., 22 karats.
What is a Gold Loan, exactly?
A secured credit option, a loan against gold ornaments or jewelry loan, is available to borrowers who pledge gold jewelry ranging from 18K to 24K as collateral. The approved loan amount is a proportion of the current market value of the pledged gold.
This form of secured loan is one of the simplest and fastest ways to get money in an emergency. Due to the rising popularity of this type of credit, several lenders are now offering gold loans with low-interest rates. Additionally, learn about gold loan renewal procedures while you’re at it.
How do you calculate the maximum gold loan value?
India’s yearly gold consumption has risen dramatically in recent decades, and this trend does not appear to be slowing down anytime soon.
When determining the sanctioned loan amount, several parameters are considered instead of gold jewelry. Lenders assess the weight and purity of pledged gold, determining the current market value based on these variables.
As previously indicated, lenders will only allow up to 75% of the market value of the pledged gold. For example, if you pledge Rs. 4 lakh in gold jewelry, the loan amount you would be approved for will not exceed Rs. 3 lakh. Furthermore, the allowed LTV ratio will be determined by the loan term, gold kind, and the borrower’s repayment capabilities. The initial conversation must be completed.
Here are the some steps to calculate gold loan value
- Thankfully, there are several options available to get back your gold ornaments. Most people don’t know the correct procedure and are left to scramble for the gold loan documents or proper documentation. You must propose a suitable person to serve as your nominee to get your gold ornaments back. This is a standard practice when you open bank accounts or fixed deposits. The institution extending your loan will then correspond with your nominee to close your account and return the pledged gold.
- The purity of your gold ornaments is another essential factor when applying for a gold loan. If your gold ornaments contain precious stones, your lender will not consider the stones’ value as collateral, so be sure to carefully calculate the gold weight. If your gold is 18K, the loan amount will be much lower than 22K. You can also get a loan for a lower amount if you have a higher-quality gold ornament.
- While pledging your gold to a bank will increase your chances of getting a loan, you should be aware of the repayment terms before you begin. You should be aware that many lenders charge a high-interest rate on gold loans. Hence, you should carefully read the loan agreement’s fine print and make sure that it matches your financial situation. And most importantly, don’t forget to keep track of your repayment schedules.
- A bank will usually appraise your gold ornaments before approving your loan. The purity of the gold determines the loan principal, and it’s important to remember that most gold accessories are less pure than 24k or 22k bullion. The ratio of gold to other metals and alloys is called karats. A wedding ring can be one to two karats, about 50% purity.
When you’re applying for a loan, you’ll typically be asked to pledging gold ornaments. If your gold ornaments are valued at more than $5,000, it may be worth looking into a gold loan. But if you don’t have enough gold, it’s unlikely you’ll get the money you’ve borrowed., and having it pled against the loan makes it more challenging to get the money you’re seeking. You could still be eligible to get your gold ornaments back if you pledge them to an account with a bank.