How Is a Gold Loan Amount Calculated?

A gold-loan amount is not based on the jewellery’s retail purchase price.

The basic structure is:

Eligible gold value × permitted loan-to-value ratio = potential loan amount

The eligible gold value is influenced by the assessed purity, eligible net gold weight and reference rate used by the lender. Approval and the final amount remain subject to KYC, lender policy, regulatory requirements and loan documentation.

What is a gold loan?

A gold loan is a secured loan in which eligible gold jewellery, ornaments or other permitted articles are pledged to a lender.

The borrower receives funds and agrees to repay:

• Principal
• Interest
• Applicable charges

The pledged articles are held as collateral until the obligations under the loan agreement are satisfied.

The Reserve Bank of India issued harmonised directions in 2025 for regulated entities lending against gold and silver collateral.

Step 1: The lender identifies eligible collateral

Not every object containing gold will necessarily qualify.

The lender’s policy and applicable rules determine whether it accepts:

• Gold jewellery
• Gold ornaments
• Eligible gold coins
• Articles with stones
• Damaged jewellery
• Particular purity ranges

Ask the lender to identify the exact articles included in the valuation.

Step 2: The articles are weighed

The complete article may include both gold and non-gold material.

The lender may distinguish between:

• Gross weight
• Stone weight
• Other non-gold components
• Eligible net gold weight

Precious stones, making charges and sentimental significance generally do not increase the intrinsic collateral value of the gold. RBI’s valuation principles have historically required lenders to base eligible value on the gold content rather than other retail cost elements.

Step 3: Purity is assessed

Purity determines how much of the eligible weight is gold.

For example, an ornament of lower purity should not be valued as though its entire weight were 22-carat gold. RBI guidance has required lower-purity jewellery to be valued proportionately.

The assessment may consider:

• Hallmark and fineness marking
• HUID information
• Lender’s approved assaying procedure
• Condition and construction of the article
• Additional verification required by policy

A hallmark can support purity identification, but it does not automatically guarantee loan approval.

Step 4: A reference value is applied

The lender does not simply use the price at which the jewellery was originally purchased.

A regulatory or lender-approved reference price is applied to the eligible gold content. The exact methodology must be confirmed from the lender’s current policy and loan documents.

Ask:

• Which reference source is used?
• Which purity is being valued?
• What date or averaging period applies?
• What eligible gold weight was recorded?
• Can you receive a written valuation record?

Step 5: The loan-to-value ratio is applied

The loan-to-value ratio, or LTV, represents the relationship between:

• The loan amount; and
• The assessed eligible collateral value

The permitted LTV may depend on applicable regulation, loan amount, loan purpose, lender type and lender policy.

This means a customer will not necessarily receive a loan equal to the entire assessed gold value.

A lower LTV creates a margin between the assessed collateral value and the amount lent.

Step 6: Eligibility and documentation are completed

Gold value alone does not determine approval.

The lender may also require:

• Minimum age
• Identity verification
• Address verification
• PAN or other required information
• Ownership declaration
• Purpose-related information
• Bank-account details
• Signed loan documentation
• Other KYC or regulatory checks

The website enquiry, initial assessment or per-gram indication is not a sanction letter.

Step 7: Review the cost of borrowing

Before accepting a gold loan, examine:

• Sanctioned amount
• Interest rate
• Whether the rate is fixed or otherwise structured
• How interest is calculated
• Annualised cost disclosure
• Processing charges
• Valuation charges, if applicable
• Penal charges
• Repayment dates
• Loan tenure
• Renewal conditions
• Prepayment terms
• Part-release conditions
• Consequences of default

Do not compare lenders only using the advertised interest rate. Compare the total amount expected to be repaid.

What happens after repayment?

The applicable lender procedure and loan agreement govern the release of the pledged articles.

You should retain:

• Valuation or pledge record
• Loan agreement
• Payment receipts
• Settlement confirmation
• Article-release acknowledgement

RBI’s fair-practice guidance requires lenders to release securities after loan repayment, subject to any legitimate and properly notified lien.

A simple hypothetical illustration

Assume a lender determines an eligible gold value of ₹X.

The potential loan amount would be:

₹X × applicable LTV

This is only an explanation of the calculation structure. It is not a rate quotation or loan offer.

The final result can change based on:

• Actual purity
• Eligible net weight
• Reference price
• Permitted LTV
• Lender policy
• Regulatory requirements
• Customer eligibility

Gold-loan enquiries in Mundakayam

Customers considering a loan against eligible gold in Mundakayam or Kottayam can contact Aladis Gold Loan for its current lender identity, terms, eligibility, charges and documentation requirements.

Do not publish an interest rate, repayment promise or approval timeline unless it is current, verified and consistently available.

Frequently asked questions

Is making charge included in gold-loan valuation?

Making charge relates to producing the jewellery and generally does not increase the intrinsic gold collateral value.

Are stones included?

Stones and other non-gold material generally do not form part of eligible gold value.

Does hallmarked jewellery guarantee a higher loan?

Not necessarily. Hallmark information can support purity identification, but the final loan depends on assessment, eligible value, LTV, policy and eligibility.

Can I receive the entire market value as a loan?

Not normally. A lender applies the permitted LTV and its policies to the assessed eligible collateral value.

Is a gold loan free of risk?

No. It creates a repayment obligation. Customers should understand the consequences of delay or default before proceeding.