Gold being accurate access to funds during emergencies and gold loan being the power of the asset is accompanied by different specifications and approximations related to the evaluation of the loan amount. Nowadays, online EMI calculators have made calculations easy. The evaluation is done based on the purity of your gold and the amount of total gold offered for the purpose. How is a Gold Loan Eligibility Amount Calculated? The answer to the respective question has specified calculation procedures and ratios as per different lenders and institutions granting gold loans. Different institutions may allow a different percentage of loans for the same gold quantum but the thing that remains common to all of them is that the loan value is never the same as the gold offered.
Everyday gold rates and grids vary, and hence the corresponding organizations offer the best offers of interest rates based on the purity and the per gram gold prices. Different banks and institutions have demarcation in the procedure just to stand unique in the market. The real point that attracts attention understands which one can get the best principal amount of benefit.
Below is a full-fledged three-step guide to making the thought process easy with versatile applicability.
- Accurate information about the loan to value ratio (LTV): Having the basic conceptual knowledge about the current value of your gold as per the purity standards of the same day are your first step towards your consideration of a gold loan facility. The rate of the same for each gram is based on the LTV ratio. The ratio can be defined in simple words as your maximum eligibility to avail loan based on the provided value of gold.
- The basics of calculations (Calculating relation): The amount allowed as a loan can be defined as the product of net weight, that day’s gold rates, and purity in carats. As in,
Amount of loan=Net weight ×per gram rate of the same day ×Purity as per the standards.
The basic key is to understand and evaluate the effectiveness of the loan to value ratio for securing the maximum principal amount.
- Predetermined decision: It is better to compare LTV to the interest rate beforehand as the advancement is in the choice of higher ratios with lower rates of interest. Any attempt to secure the maximum loan for the minimized value of interest is a steal deal favouring businesses in every aspect. Also, long-term loans are more cost-effective in comparison to short-term gold loans.
These basics and clarity prove to be a great step to take advantage of the viable asset in possession and are a clean chit and paperless help for a small self-dependent businessman in the present world. To reduce the confusion, understanding the procedure in detail is mandatory and clarity on the topic leads to a better outcome.
The same can be calculated through the online calculators available at the sites of different finance corporations, financial institutions, and banks.
Though a gold loan is instant and similar to your cash in hand option, it should be noted that it’s a secured loan in which only the borrower is at the risk of losing gold.