LTV in Gold Loans: Balancing Risk and Reward

Gold loans are an excellent way to finance your expenses in times of financial need. These loans are a secured loan option for borrowers, as they involve taking out a loan against the gold you own. The Loan to Value (LTV) ratio is essential for any gold loan, as it determines the amount of gold you can borrow, and the amount that will be disbursed to you by the lender. In this article, we will discuss the gold loan LTV ratio, its significance, and the best apps to obtain a gold loan.

What is a Gold Loan?

A gold loan is a type of secured loan, where the borrower uses gold as collateral to obtain financing from a lender. The loan amount is based on the value of the gold pledged, and the interest rate on the loan is usually lower than on other types of loans. A gold loan is a popular choice for borrowers who need quick financing, as gold loans require minimal documentation and can provide funding within a few hours.

The eligibility criteria for Gold Loan is as follows:

Age Criteria

The first criteria for a gold loan is age, with any adult above the age of 18 being eligible. A younger or older borrower may face restrictions on the loan terms, such as lower LTV ratio or extended tenure/repayment period. However, the loan disbursal amount would still majorly depend on the value of the gold pledged.

Gold Quality

The eligibility criteria of a gold loan also depend on the quality of the gold pledged, and its purity levels. Lenders prefer gold of higher purity, ranging between 18 karats and 24 karats. It is important to note that even if the borrower is in possession of multiple pieces of gold jewellery, only jewellery pieces that are of the stipulated karat and weight will be considered for disbursal. The borrower would then need to show proof of ownership of the pledged gold.

Loan Amount

The loan amount offered by the lender depends on the value of the pledged gold. Most lenders offer a maximum amount of up to 75% of the market value of the pledged gold. The loan amount offered can be calculated by multiplying the weight of the gold with the current market price per gram.

Documentation Requirements

The documentation required to be eligible for a gold loan is minimal when compared to other loan products. Any person above the age of 18 can avail a gold loan by furnishing a copy of their government-issued identity documents like driver’s license, PAN, Aadhar, Voter ID, passport or any other documents deemed acceptable by the lender.

Moreover, the lender generally requires proof of ownership of the gold being pledged through necessary documents or invoices/bills. The billing documents should correspond to the physical gold pledged to avoid mismatched karat, weight and value calculations.

Credit Score

While gold loans are secured loans, a good credit score can aid in getting more favourable loan terms. A high credit score, typically above 750, works in favour of the borrower and can mean better repayment terms, higher LTV ratio, or quicker loan approvals.

What is a Loan to Value (LTV) Ratio?

The LTV ratio in a gold loan determines the amount that a lender is willing to disburse to the borrower based on the value of the gold pledged. It is the ratio of the loan amount to the value of the gold pledged.

For example, suppose you pledge gold worth Rs.1,00,000, and your LTV ratio is 75%. In that case, the maximum loan amount you can obtain is Rs.75,000. The remaining Rs.25,000 is considered the margin held by the lender to safeguard against fluctuations in the gold’s value.

LTV ratio is a crucial factor in determining the loan amount that a borrower can receive in a gold loan. The higher the LTV ratio, the more loan amount a borrower can receive. However, it is important to note that a higher LTV ratio also means a higher risk for the lender, which may result in higher interest rates on the loan.

Eligibility Criteria for Gold Loans

The eligibility criteria for gold loans may vary depending on the lender. However, some general requirements for eligibility include:

– The borrower should be at least 18 years old.
– The borrower should be the owner of the gold pledged.
– The gold should be 18 karats or higher.
– The gold should be in a physical form and not in the form of paper or investment certificates.
– The age and weight of the gold will be the primary determining factors in deciding the LTV ratio.

Best Apps to Avail a Gold Loan

When it comes to obtaining a gold loan, there are several apps available in the market that offer easy and efficient access to the loan. Here are some of the apps that provide a hassle-free experience for availing a gold loan:

1. Bajaj Finserv App

The Bajaj Finserv App provides a simple and convenient experience for availing gold loans. The app offers loans at attractive interest rates, with a high LTV ratio that makes it easy to borrow against the value of the gold pledged. Moreover, through the app, borrowers can also enjoy a hassle-free application process, coupled with secure, safe, and instant approval. Additionally, the app comes with several other financial services such as money management tools, investment options among others.

2. Muthoot Gold Loan App

Muthoot Gold Loan App is another useful app that allows borrowers to track their gold loan status and access relevant information regarding disbursal. The app offers a personalized gold loan processing facility, providing user-friendly interface, minimal documentation and instant disbursal of funds. Also, Muthoot Finance conducts free evaluation campaigns of your gold to assess it for a gold loan amount calculation.

3. Rupeek

Rupeek provides a digital touch to the gold loan process, resulting in less physical exposure. The app offers a loan disbursal process featuring instant delivery of funds to the user’s account through the UPI-based platform. Rupeek also promises one of the lowest interest rates in the industry for gold loans with its bespoke Gold Loan offers for every borrower.

4. SBI Gold Loan App

SBI Gold Loan app offers an easy-to-use interface and an efficient loan disbursement process. Through the app’s gold loan offers, borrowers have access to up to Rs. 20 lakhs disbursal in a streamlined manner.

In conclusion, gold loans offer a convenient way to access funds in times of financial need. The LTV ratio plays a crucial role in determining the loan amount a borrower can obtain, so it is vital to consider the different lenders’ terms and conditions. Obtaining a gold loan through any one of the best gold loan apps provides a secure, hassle-free experience and ensures a quick disbursal of money, without the need for cumbersome documentation.