HomeBusinessFinance5 Factors that affect the gold loan

5 Factors that affect the gold loan

It is essential to know everything before applying for a gold loan because that makes the process easier. When you apply for the loan, then the lender will value the gold in order to understand the gold loan amount that you can borrow. Various factors affect the amount of gold loan, so make sure you know about them. These factors might change your loan amount or affect other things.

Factors affecting gold loan amount:

● Weight of gold:

The first thing that will decide the amount of your gold loan is the weight of the gold. It is a no-brainer that the amount will be according to how heavy the gold is. If the gold is heavy in weight, then the valuation of the gold will be higher.

The weight will directly affect your gold loan amount, and if the weight is not so much, then the loan amount will be less. If you want to purchase a jewelry piece in exchange for gold, then the lender will check the weight of the gold and decide the gold amount you can loan from the financial institution.

● Purity of gold:

Another factor that might affect the gold loan or the gold loan interest rate is the purity of the gold that you are giving to the lender. If the purity of your gold is 24 carat, then the valuation of the same will be higher, but if there is anything with the purity, then the value will differ. If you want to avail loan against your gold, then make sure that the purity of the gold is at least 18 carats.

● Fluctuations in gold prices:

Gold prices fluctuate daily, and there can be major fluctuations in the gold valuation, so decide the loan amount you will get. So make sure that you are borrowing the loan when the gold prices are not fluctuating and when you will be able to get more money against the gold.

● Tenure and amount:

There are a few factors that affect the gold loan rate of interest. Tenure and amount can both change the interest that you will be getting on the amount of your loan. If you have a higher interest rate, the loan tenure will be longer, and if the interest rate is low, the tenure will also be low.

If you lower the loan tenure that you are taking, the overall interest amount from the monthly installment will increase, adding more expense to your monthly budget. If the size of your loan is small, then the interest rates are going to cover the fixed costs and save you from paying extra monthly expenses.

● Repo rates:

The rate for the gold loan will change if the Reserve Bank of India adjusts the repo rate, which is the rate at which the money is lent to commercial banks. So the change in repo rates can change the overall loan amount and interest.


When you are going to take a loan against your gold, you need to ensure that the purity of your gold and the price in the market is not fluctuating much. It will help you get a good amount and adjust the interest rate accordingly.

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