Understanding Gold Loan Calculations

Gold loans are secured loans where you pledge your gold ornaments as collateral. They are popular due to quick processing and relatively lower interest rates compared to personal loans. A Gold Loan Calculator helps you estimate your repayment schedule based on the loan amount and gold purity.

Unlike home loans, gold loans are short-term (usually 6 to 36 months). The interest rates can vary significantly depending on the Loan-to-Value (LTV) ratio. A higher LTV often attracts a higher interest rate.

Repayment Schemes for Gold Loans

While this calculator shows a standard EMI breakdown, lenders often offer flexible repayment options:

• EMI Scheme: You pay a fixed amount (Interest + Principal) every month, just like a home or car loan.
• Bullet Repayment: You pay the entire principal and interest at the end of the loan tenure. No monthly payments are required.
• Interest Only: You pay only the interest component every month and repay the principal amount at the end of the tenure.

Factors Affecting Gold Loan Eligibility

• Purity of Gold: Banks typically accept gold jewelry of 18 Carats to 22 Carats. Higher purity gets a better valuation.
• Gold Rate: The loan amount depends on the current market rate of gold. Lenders usually offer up to 75% of the gold’s market value (LTV).
• Repayment History: Unlike unsecured loans, CIBIL score is less critical here, but a good history can fetch lower interest rates.

Formula Used for EMI Calculation

For the EMI scheme, the standard formula is used:

E = P x R x (1+R)^n / [(1+R)^n-1]

• E: Monthly EMI
• P: Principal Loan Amount
• R: Monthly Interest Rate (Annual Rate / 12 / 100)
• n: Loan Tenure in Months

Frequently Asked Questions (FAQs)