Gold Loan Online: What You Need to Know About Loan-to-Value Ratios
When you pledge your gold jewellery or assets to avail a gold loan, the Loan-to-Value (LTV) ratio is the key factor that determines the maximum loan amount you can borrow against your gold. The LTV ratio represents the percentage of the market value of your gold that lenders are willing to lend.
What is Loan-to-Value (LTV) Ratio in Gold Loans?
The LTV ratio is calculated as:
LTV Ratio=(Loan AmountMarket Value of Gold)×100LTV Ratio=(Market Value of GoldLoan Amount)×100
For example, if your pledged gold is worth ₹1,00,000 and the lender’s LTV is 75%, the maximum loan you can get is ₹75,000.
How is Gold Value Determined for LTV?
The market value is based on the current gold price per gram multiplied by the actual purity and weight of the gold.
Jeweller’s making charges and stones are excluded from the valuation for LTV calculations.
The price used can be an average of recent market rates or rates set by the lender and may vary per lender.
RBI Guidelines on LTV Ratio for Gold Loans (2025 Update)
The maximum LTV ratio is capped at 75%, meaning lenders cannot offer a loan amount higher than 75% of the gold’s current market value.
A temporary increase to 90% was allowed during the COVID-19 pandemic but expired in March 2021.
This cap protects both borrowers and lenders by limiting risks of over-lending.
Why Does LTV Matter?
For Borrowers: Higher LTV means higher loan amounts against the same gold, helping meet larger financial needs.
For Lenders: Higher LTVs carry greater risk of loss in case of defaults, so loans with higher LTVs might attract higher interest rates.
Lenders also factor in operational and safekeeping costs which influence loan pricing.
Tips to Maximize Your Gold Loan Amount
Check Purity and Weight: Get your gold correctly appraised for maximum valuation.
Compare LTV Ratios: Some lenders offer competitive LTV ratios close to the RBI limit—choose wisely.
Monitor Gold Prices: Apply when gold prices are stable or high to maximize loan amount.
Understand Terms: Higher loan amounts at max LTV may come with stricter interest rates or fees.
Frequently Asked Questions (FAQ)
Q1: What is the maximum loan-to-value ratio allowed for gold loans in 2025?
The RBI caps the LTV ratio at 75% of the current market value of the gold.
Q2: Does the making charge or stone value add to loan eligibility?
No, only the actual weight and purity of the gold are considered; making charges and stones are excluded.
Q3: Why do lenders not offer 100% of the gold value as loan?
Lenders keep a margin to cover price fluctuations, recovery costs, and risks of default.
Q4: Can different lenders offer different LTV ratios?
Yes, but they cannot exceed the RBI ceiling of 75%; usually, NBFCs and banks offer between 60% to 75%.
Q5: How is the gold price used for valuation decided?
Lenders use current or average market prices over days or weeks, sometimes based on local market rates.
Published on: July 28, 2025
Published by: PAVAN
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