The organized gold loan market has grown at a CAGR of more than 30% during the last decade. This phase has also witnessed NBFCs and other financial institutions garnering a high market share. Transparency in business models, attractive interest rates, and high-quality customer service are some of the reasons behind the exponential growth of organized players in the gold loan market.
Cash for gold are secured loans. Secured loans are the ones where the borrower has to pay collateral against the loan amount. In gold loans, the gold is the collateral. The budget-friendly interest rates, flexible equated monthly instalments, and some other amazing features of loan against gold have led to such a tremendous demand for gold loans.
Gold Loan per Gram Price
The upper bar to the gold finance amount sanctioned to an individual is decided based on the value of gold loan per gram pledged by the particular individual.
Final price of the jewellery = Price of gold X weight of gold (in grams) + Making charges + GST at 3% on (Price of jewellery + making charges)
Let us look at an example to make things more clear. Suppose a person A bought an 18 carats jewellery item which weighs 12 grams. The market price of 18 carats gold at that instance be Rs.2500 per gram. Let the making charges be 11%. Let’s do the calculations to find out the final price of the jewellery.
Price of 12 gram 18 carats gold = 12*2500 = Rs.30,000
Making charges = 30,000*(11/100) = Rs.3,300
GST = (30,000+3,300)*(3/100) = Rs.999
Final price of the jewellery = Rs.34,299
The formula might be a bit tricky to understand if you are not familiar with the terminologies. Let us look at the step-by-step procedure of how this formula has been orchestrated and deployed to evaluate the gold loan per gram value.
The overall weight of gold
The gold finance lender first calculates the net weight of gold. In case the pledged gold contains jewellery items, the net weight of gold is calculated by getting rid of the weight of gems and other things from the total weight. Jewellery items have making charges and taxes as GST added to the total cost which you will not be taken into consideration while finding out the net worth of your respective jewellery item. Hence, jewellery items might not add up to give you the worth that you expected. The gold lender finally reveals the net calculated gold amount to the borrower after the inspection is done.
Carats of gold
Gold items available in the market are usually found in variants of 14, 18, 20, and 22 carats. The purity of the gold item is scrutinized by the gold loan lender to calculate its correct value. All the calculations are done considering 22-carat equivalents of the different variants of gold.
Price per gram of 22 carats gold
After the overall weight is calculated and purity of the gold is measured, the lender proceeds to the next step – evaluating the overall price of the gold. Lenders use the average price of 22 carats gold in the past 30 days as datum to calculate the per gram value of gold.
After the above calculations are done, the values obtained are used as inputs for the formula to calculate the net worth of gold pledged. Now let us look at how the output value decides the maximum approved loan that you can avail from a particular gold loan scheme.
Net sanctioned amount
The Reserve Bank of India has instructed to limit the loan to value ratio, also known as the LTV ratio, to a maximum of 75%, keeping in mind the fluctuation in the worth of gold. To make you understand how this ratio works clearly, let us take an example. Suppose a person X pledges gold against a gold loan whose net worth after the necessary calculations are found to be Rs. 1,00,000. Then X can sanction a cash for gold amount which is 75% of the net worth of gold that is Rs. 75,000. Hence greater the net worth of the pledged gold, greater is the allowed sanctioned amount.
How to get better gold loan amounts?
Keeping a few simple things in mind can help you get the best gold loan per gram value.
Purity of gold
Pledging 22 carats gold items can offer you a better gold loan amount. This is because 22 carats gold items have the highest composition of gold in it, increasing the value of gold loan per gram.
Look for a better Gold loan to value ratios
RBI has set the loan to value ratio to 75%. Gold loan lenders offer varied loan to value ratio in their terms. Hence, look for a lender that offers you the highest loan to value ratio to get a better gold loan per gram value.
Hallmarked vs non-hallmarked
Muthoot Fincorp gold loan per gram is calculated for both hallmarked and non-hallmarked gold products. Pledging a hallmarked gold item reduces the chance of under evaluation and hence can offer you a better Muthoot gold loan per gram value for your pledged gold. Some lenders are found to charge a lower processing fee on hallmarked gold goods.