Gold has always been a trusted asset in Indian households—not just for investment and jewelry but also as a quick source of credit. With gold loans gaining popularity, many borrowers are noticing that rising gold prices can directly increase their loan eligibility. But how does this actually work? Let’s break it down.
Why Gold Prices Matter in Gold Loans
The amount you can borrow against your gold depends on its current market value. When gold prices rise, the value of your pledged jewelry increases, which allows you to access a higher loan amount.
👉 Example:
If gold price = ₹5,000 per gram
You pledge 50 grams (value = ₹2,50,000)
At 75% LTV (Loan-to-Value), loan = ₹1,87,500
Now, if gold price rises to ₹6,000 per gram:
Value = ₹3,00,000
Loan = ₹2,25,000
That’s an extra ₹37,500 eligibility just because of price movement!
RBI’s Role: The LTV Cap
As per RBI guidelines, lenders can offer a maximum of 75% of the gold’s market value.
Rising prices mean the base valuation goes up, so even at the same 75% cap, your loan eligibility increases.
Benefits of Higher Eligibility
More Funds During Emergencies – Access additional liquidity without pledging extra gold.
Better Flexibility – Borrow larger amounts while keeping repayment tenure short.
Reduced Need for Multiple Loans – One gold loan may be enough to meet your needs.
Things to Keep in Mind
Volatility Risk: If gold prices drop, your lender may ask for additional security or partial repayment.
Purity Check: Only 18K–24K gold jewelry is considered for valuation.
Lender Policies: Some banks/NBFCs may keep LTV slightly lower than 75% to reduce risk.
Quick Tips to Maximize Your Gold Loan Eligibility
Track market gold prices before applying.
Pledge hallmarked jewelry for better valuation.
Compare lenders for interest rates and charges.
Borrow only what you need to avoid repayment stress.
FAQs
Q1: How much loan can I get if gold prices rise?
Up to 75% of the current market value of your gold, as per RBI rules.
Q2: Will my existing gold loan eligibility increase automatically if prices rise?
No, only new applications or renewals benefit from the updated gold price.
Q3: Can falling gold prices reduce my loan amount?
Yes, if prices drop, you may need to add security or repay part of the loan to maintain LTV.
Q4: Is now a good time to take a gold loan when prices are high?
Yes, higher gold prices usually mean better loan eligibility.
Q5: Can I re-pledge my gold for a higher amount if prices rise further?
Yes, you can close the current loan and reapply, or request a top-up if your lender allows.
Published on : 2nd September
Published by : SMITA
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