If you ever want to explore a gold loan, you should know that the total amount you can borrow is directly related to the value of the gold you pledge.
Therefore, the prevailing gold rate per gram today is a key factor in determining how much you can borrow. However, you cannot avail a loan amount equal to the gold's value. It will always be less than the market gold rate for that day.
How Is Gold Rate Used for a Gold Loan?
When you apply for a gold loan application, the lender assesses the value of the gold you pledge. The gold rate today per gram is an important part of this valuation. However, the lender does not simply multiply the market rate by the total weight of your jewellery. It is affected by the following factors:
Gold Purity
Because the amount of actual gold differs by purity, the applicable rate per gram also changes. For example, 22K gold contains about 91.6% pure gold, while 18K gold contains about 75% pure gold. Therefore, a piece of 22K jewellery with the same weight as an 18K jewellery will not have the same gold value.
Net Gold Weight
The lender considers the net gold weight, rather than simply using the total weight of the jewellery. This is important because jewellery may contain stones, beads or other materials that are not gold. The lender also does not consider jewellery-making charges or GST in this calculation.
Market Gold Price
The prevailing market gold price affects the value of the gold you wish to pledge for a loan. When gold prices rise, the value of the gold increases, which can allow you to borrow more, whereas lower gold prices can have the opposite effect.
Loan-to-Value (LTV)
LTV refers to the maximum percentage of the gold’s assessed value that a lender can offer as a loan. For consumption loans RBI has stated that:
- The highest LTV for gold valued up to ₹2.5 lakh is 85%.
- The highest LTV for gold valued between ₹2.5 and ₹5 lakhs is 80%.
- The highest LTV for gold valued above ₹5 lakh is 75%.
Fluctuating Interest Rates
Changes in gold prices can also influence the interest rates offered on gold loans. When gold prices rise, the higher collateral value may reduce the lender’s risk and reduce the interest rate. However, interest rates depend on several factors, including market conditions, lender policies and the borrower’s loan terms.
How Is Gold Loan Value Per Gram Calculated?
The gold loan per gram rate calculation is based on the weight and purity of your gold and the applicable gold rate. The lender then applies the LTV limit to work out the loan amount.
Example: Let’s suppose you pledge 30 grams of 22K gold jewellery. After assessment, the lender determines the eligible weight of gold is 20 grams, at the applicable market rate of ₹6,000 per gram. The following calculation shows how gold loan value is calculated for this example.
Gold Loan Value = 20 grams × ₹6,000
Gold Loan Value = ₹1,20,000
Now comes the LTV calculation. Since your gold’s value is less than ₹2.5 lakh, you can get a maximum LTV of 85%.
So, 85% of ₹1,20,000 = ₹1,02,000
This is the maximum loan amount you can get from the lender. The final amount may still depend on other factors. To estimate your potential gold loan amount, you can use a gold loan calculator.
Gold Rate vs Gold Loan Amount Per Gram
The gold market value, the assessed value of your pledged gold and the final loan amount are three different things. That is why the gold rate today per gram that you see online or at a jewellery shop may not be the rate used to value your gold for a loan.
From 1 April 2026, RBI requires lenders to use the lower of two reference prices to determine the gold market value of your gold:
- The average closing price of your gold’s relevant purity in the preceding 30 days.
- The closing price for the same purity on the previous day.
The rate used must be published by the India Bullion and Jewellers Association (IBJA) or a commodity exchange regulated by SEBI. So, even if the gold rate today per gram has increased, the lender may still value your gold at a lower reference rate for the loan.
The assessed net weight of your gold can further reduce its price because lenders do not consider GST or other making charges in the loan calculation. Finally, the applicable LTV ratio determines the maximum gold loan value you can be eligible for.
After that, the lender may still check your gold loan eligibility and then quote a final loan amount with the applicable interest rate.
If you are seeking a gold loan for your financial needs, Manappuram Finance offers affordable gold loan plans for up to ₹5 crores*.