How Can You Calculate Your Gold Loan Eligibility?

Gold loans are a quick and simple way to borrow money. You give your gold as security and get a loan based on its value. But how do banks or lenders decide how much loan you can get? That’s where gold loan eligibility comes in.

Let’s learn how you can calculate it.

1. Understand What Gold Loan Eligibility Means

Gold loan eligibility means the amount of loan you can get based on the gold you provide. It depends on:

• The purity of the gold
• The weight of the gold
• The current market price of gold
• The lender’s loan-to-value (LTV) ratio

2. Know the Type of Gold Accepted

Lenders usually accept:

• Gold jewellery (22 karat or 18 karat)
• Gold coins (if issued by banks, up to 50 grams)

They don’t accept gold bars, raw gold, or very small gold pieces.

3. Purity of Gold Matters

Purity is measured in karats.

• 24 karat gold is pure gold, but not usually used in jewellery.
• 22 karat gold has about 91.6% pure gold.
• Lenders calculate the loan amount based on this purity.

So, the purer the gold, the higher the loan amount.

4. Weight of the Gold

Only the net weight of gold is considered.

For example, if your gold chain weighs 30 grams, but has stones or other metals, the lender removes that weight while calculating.

So, only the gold part counts.

5. Current Market Value of Gold

Lenders use the average market price of gold over the past few days.

They check the rate per gram of gold and multiply it by the net weight.

Let’s say:

• You have 20 grams of 22 karat gold
• The market price is ₹5,800 per gram (for 22 karat)

Then:
20 × 5,800 = ₹1,16,000 (total gold value)

6. Loan-to-Value (LTV) Ratio

RBI allows lenders to give up to 75% of the gold’s value as a loan.

So in the above example:

• Gold value = ₹1,16,000
• LTV = 75%
• Loan eligibility = ₹87,000

Different lenders may offer slightly less depending on their policy.

7. Use a Gold Loan Calculator

Many banks and NBFCs offer online gold loan calculators.

You just need to:

• Enter gold weight
• Select karat (purity)
• Check the market rate

The calculator shows your estimated loan amount instantly.

8. Other Factors That May Affect Eligibility

While gold value is the main factor, lenders may also check:

• Your repayment ability
• Existing loans
• Credit score (in some cases)

However, gold loans usually don’t need high credit scores. Your gold is the security.

9. Documents Required

To apply, you’ll need:

• ID proof (like Aadhaar, PAN)
• Address proof
• Photograph

How to Calculate Gold Loan Eligibility: A Simple Example

Let’s say you have:

• 100 grams of 22K gold jewellery

• The market price of 22K gold is ₹5,200 per gram

• The lender offers an LTV of 75%

Step 1: Calculate the value of your gold

100 grams × ₹5,200 = ₹5,20,000

Step 2: Apply the LTV

75% of ₹5,20,000 = ₹3,90,000

Your eligible gold loan amount = ₹3,90,000

Some lenders may offer more or less, depending on appraisal methods and market volatility buffers.

Summary

To calculate your gold loan eligibility you must know the gold’s purity and weight. You will have to multiply with the current gold price and apply the LTV ratio (usually 75%). The calculations are simple but it is way easier when you have a gold loan calculator. Simply enter the quantity of gold, the gold loan interest rate and the purity. The tool will display the results at a click. You will have a clear idea of the amount you will be eligible for. Also, if you enter the interest rate, too, you will get details like the EMI and the total payable interest for the loan. So, access a gold loan calculator and head straight to smarter decision-making.