Business Finance

Complete Guide : How EMI Calculated On Gold Loan

What is a Gold Loan?

A gold loan is a secured loan taken from a lender by a borrower in lieu of pledging their gold articles – jewelry, gold coins, or bars – as collateral. The gold in question must be within a range of 18-24 carats and the loan amount sanctioned is calculated as a certain fraction of the gold – can go up to 80%. The calculation depends on the quality of the gold and its current market value.

How is Gold Loan EMI Calculated?

The Gold Loan EMI is the amount payable each month to the bank or financial institution you have availed your loan from. EMI consists of the principal amount and interest component. The interest component tends to be higher during the initial months and gets reduced with each EMI. Gold Loan EMI calculator help borrowers calculate their monthly EMI at their desired interest rates, for particular tenures. Thus, these calculators are provided by most lenders for their potential clients.

EMI depends on loan interest, interest rate, and loan tenure.


∙ Loan Amount –
Higher the gold loan amount applied for, higher is the EMI applicable.
∙ Interest Rate – Higher jewel loan interest rate leads to higher amounts of EMI.
∙ Loan Tenure – High loan tenures lead to lower EMI.
Interest Rates of Gold loans
Interest rates are bound to vary from one lender to the other. You can compare the different interest rates available in the market before choosing the one that best fits your condition and needs.

Interest rates range from 9.24% to 17%. Loan disbursal may also include a nominal processing fee that some lenders charge. Hence, you need to check for variables, such as the rates of interest levied, processing fee, late payment charges, and also pre-payment charges before you decide to go for the lender.

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Gold Loan Tenure

These are short-term loans with a flexible tenure period that range anywhere between a minimum of 1 month to 5 years or even more. It depends on the lender as to how long of a loan period he provides for.

Gold Loan Calculator

Gold loan eligibility gets calculated in terms of the loan per gram of gold provided to the borrower. It is the gold loan amount you may get depending on:

1. The value of gold pledged by the borrower

This depends on the current market price and is calculated as the past 30 days average price of 22carat gold.

Some private lenders will calculate the market value according to the per gram market value of gold as it stands on the day of the loan application. Stones, gems, and metals are usually excluded from the calculation method.

2. The purity of the gold pledged

The gold ornaments should range in between 18 to 24 carats

3. LTV (Loan to Value) applied by the banks

LTV is the ratio of a loan to the value of an asset purchased, in this case, the gold that is kept as collateral. As per the Reserve Bank Of India, the loan-to-value ratio of a gold loan cannot exceed 75%

Advantages of Gold Loan on EMI:


∙ The option of EMI saves you from the financial burden of having to repay the entire principal amount at once, at the end of the loan tenure.
∙ The EMI repayment option is aptly suited for long tenure loans, though banks and NBFCs are now offering EMI repayment options on shorter tenure loans as well.
∙ Lower interest rates are available for EMI gold loans as compared to alternative options like Bullet Repayment schemes.
Gold Loan EMI calculators online help you answer all questions and compare interest & EMI rates of all banks before deciding on one. The online calculators have the advantage over manual calculations as they are free from human error.

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Indian households have gold articles in their lockers that they can put to good use as and when required. Your immediate and urgent fund requirements can be met by using these gold articles. Various banks and NBFCs offer their customers loans against golds at attractive interest rates. One should have the know-how of the procedure, advantages, disadvantages, etc. before applying for a gold loan.