What Types of Gold Are Eligible for a Gold Loan: An Expert Guide

Summary: You can get a gold loan by pledging BIS-hallmarked jewellery or bank-issued gold coins. The loan amount depends on purity, weight, market price, and LTV (max 75%). Gold bars, plated, low-purity, mixed-metal, or undocumented gold are not eligible as per RBI guidelines.

Gold loans are a popular alternative to traditional loans for acquiring urgent funds. People choose gold loans because they are easy to get, and the application process is also hassle-free.

It’s important to know the various types of gold that you can use for these loans. This guide will help you understand the types of gold required for a gold loan and what factors affect your gold loan eligibility.

Types of Gold Required for a Gold Loan

When you want to get a gold loan, lenders usually accept certain kinds of gold items. Here are the main types:

• Gold Jewellery: Gold jewellery or ornaments are some of the most widely accepted items for a gold loan. This includes items like rings, necklaces, bangles, earrings, etc. The value of your gold jewellery is determined by its gold content, which is usually measured in carats. The higher the carat rating, the more valuable the gold. As per the latest RBI draft guidelines, only gold jewellery and ornaments with a minimum purity of 22 carats are eligible for a gold loan.
• Gold Coins: Gold coins are also accepted by some lenders for gold loans except Manappuram Finance Limited. However, with gold coins, the conditions are a bit more rigid. If you are thinking of using gold coins as collateral, it is a good idea to check with the lender first to see what their exact requirements are and how they will value your coins.
• Hallmark Gold: Hallmark Gold is certified by the BIS (Bureau of Indian Standards). This type of gold is preferred by lenders because it boasts a mark of quality that makes it legally compliant and a verified form of gold.

Types of Gold Not Eligible for a Gold Loan

Not all gold items meet the gold loan eligibility requirements. Here are some common types that usually do not qualify to serve as collateral for a gold loan:

• Gold-Plated Jewellery: Jewellery that is gold-plated or has a thin layer of gold over another base metal is not accepted by reputable lenders, such as Manappuram Finance Limited.
• Low Purity Gold: The purity of gold jewellery is measured in karats. Manappuram Finance Ltd. does not accept any gold jewellery, bars, or coins that are below 18-karat in purity.
• Gold Without Proper Documentation: If the gold assets you pledge do not have proof of their purity, they may not be accepted. Non-hallmarked jewellery often gets rejected if it fails to meet the purity standards set by the lenders.
• Mix Metals: Jewellery made from a mix of multiple metals might often be rejected if the gold percentage does not match the purity standard of 18-carat to 24-carat gold.
• Gold with Stones: Jewellery items that carry more stones than gold in weight are usually not accepted by us. They are rejected because valuing them is challenging.
• Gold Bars: According to the new RBI guidelines, gold bars are no longer an acceptable asset for obtaining a gold loan. The new guidelines clearly state that lenders cannot approve gold loans for primary gold, including gold bars.

Factors that Influence the Gold Loan Amount

Here are the main factors that affect gold loan eligibility:

• Purity of Gold: The purer the gold, the higher the loan amount. Manappuram Finance Limited offers gold loans against gold assets with a purity ranging from 18-carat to 24-carat. If you want to acquire a higher loan amount, consider pledging gold with high purity. In this way, even if you are pledging less jewellery in grams, the purity can compensate for it.
• Gold Weight: The weight of the gold also affects the loan amount you can receive against your collateral. More gold weight also means higher gold value. However, it is to be noted that the loan will only be provided for the amount of gold in it and not for its added stones and metals.
• Gold Price in the Market: Gold prices are volatile and subject to constant change. The loan amount you receive will be based on the current market price of gold. If you can wait, opt for a loan when the price of gold is rising to receive the best amount against your collateral.
• Lender’s Loan-to-Value (LTV) Ratio: The Loan-to-Value Ratio determines the amount of money a lender can provide against gold. The LTV ratio has been fixed by the Reserve Bank of India (RBI). Lenders are allowed to hand out up to 75% of the pledged gold’s value.

Conclusion

You can pledge your gold for a loan to meet urgent financial needs while keeping your assets secure. However, understanding the types of gold required for a gold loan and the factors affecting your loan eligibility is important before you apply.

Lenders usually accept gold jewellery and certain gold coins, but not items like gold-plated ornaments or low-purity gold. Furthermore, the amount you can borrow depends on the purity and weight of your gold, the current gold price, and the lender's LTV ratio.

By knowing these details, you can make better decisions and get the most value from your gold assets when you need financial help.