Gold loans have long been a popular option for individuals seeking quick financial assistance by leveraging the value of their gold. With gold considered a reliable and appreciating asset, pledging it as collateral provides immediate access to funds at competitive interest rates. Finding the best gold loan percentage solution according to your specific needs is crucial to maximise this opportunity while minimising costs. This article explores how to choose the right gold loan, discusses the loan against SGB interest rate, and outlines essential factors to consider before borrowing.

Understanding gold loan percentage

A gold loan percentage, also known as the loan-to-value (LTV) ratio, refers to the amount of money a lender is willing to offer against the value of your gold. For instance, if you have gold worth Rs. 1,00,000 and the lender provides a 75% LTV ratio, you can borrow up to Rs. 75,000. According to Reserve Bank of India (RBI) regulations, the maximum LTV ratio is 75% of the gold’s current market value.

The LTV ratio is determined based on:

1. Gold purity: Most lenders require a minimum purity of 18 karats, but higher purity gold will attract a better valuation.
2. Gold weight: The weight of the pledged gold directly influences the loan amount.
3. Current market rate: Market fluctuations affect gold’s valuation, impacting the loan percentage.

Factors influencing gold loan percentage

1. Lender’s policies
   Different banks and non-banking financial companies (NBFCs) have varying gold loan percentage policies based on their internal guidelines.
2. Type of gold asset
   Gold coins, bars, and jewellery may be assessed differently, impacting the valuation.
3. Loan tenure
   Shorter tenures often offer a higher LTV ratio as the repayment risk is reduced.
4. Market conditions
   Gold’s market value is subject to fluctuations, which can affect the final LTV ratio offered by lenders.

Loan against SGB interest rate

Sovereign Gold Bonds (SGBs) are government-backed securities that offer a way to invest in gold without physically holding it. Borrowers can use their SGB holdings to secure loans as collateral. The loan against SGB interest rate varies based on the lender, but they are typically lower than rates for loans against physical gold.

Key considerations for a loan against SGB:

1. Interest rate: Although the rates are competitive, they differ across banks and NBFCs. Compare multiple lenders to find the best rate.
2. Loan-to-value ratio: Lenders generally offer an LTV ratio of up to 75% of the SGB value.
3. Repayment flexibility: Evaluate repayment terms carefully to ensure they match your financial situation.
4. Documentation: Keep your SGB certificates or statements ready for verification.

How to choose the best gold loan percentage solution

1. Identify your needs: Before applying for a gold loan, determine your exact funding requirements. This will help you decide the loan amount, repayment tenure, and type of gold to pledge.
2. Research lenders: Compare banks and NBFCs to understand their gold loan percentage policies, interest rates, and processing fees. Select a lender that aligns with your needs while offering transparent terms. Among lenders in this space, Bajaj Finance is one that you certainly must look at having as part of your lender shortlist when it comes to gold loans.
3. Evaluate interest rates and costs: Choose a lender offering competitive interest rates and low processing fees. While a gold loan percentage might be high, ensure the repayment terms suit your financial capacity.
4. Check the loan tenure: A shorter tenure might offer a higher LTV ratio but will result in larger instalments. Consider the appropriate tenure that aligns with your cash flow patterns.
5. Assess repayment options: Ensure that the repayment schedule, whether bullet payments or equated monthly instalments (EMIs), is convenient and manageable for your situation. Some lenders allow prepayment without penalties, reducing interest expenses.
6. Consider loan against SGB: If you own Sovereign Gold Bonds, a loan against SGB can provide favourable interest rates and streamlined approval. However, ensure you retain the flexibility to meet your repayment obligations.

Benefits of optimising your gold loan percentage

1. Maximise funding: Secure the highest possible loan amount against your gold’s value to meet your financial needs effectively.
2. Lower interest burden: By selecting a lender offering competitive rates and a suitable tenure, you can minimise interest expenses.
3. Flexible financing: Gold loans provide tailored financing options that allow for bullet payments or EMIs.
4. Retain gold ownership: Manage your repayments well to reclaim your pledged gold once the loan is settled.

Are you trying to get a gold loan from Bajaj Finserv? Just visit their website or make use of the Bajaj Finserv Loan App. Fill out the application form with your details, including your mobile number, and use an OTP to verify it. Your loan is authorised and prepared to meet your financial demands in a matter of seconds.

Conclusion

Finding the best gold loan percentage solution tailored to your needs requires thorough research and planning. Understanding how lenders determine the LTV ratio, evaluating the interest rates on loans against SGB, and selecting a lender with transparent terms will help maximise your gold loan benefits. With careful consideration, you can use a gold loan to unlock your gold’s value and meet urgent or planned financial needs efficiently.