If you are about to take a gold loan, you should know how fluctuating prices of Gold could impact your loan. Read this post for a detailed explanation.
A gold loan is a hassle-free option for individuals looking for a loan. It requires a borrower to pledge their gold jewellery against the loan amount. When the loan is fully repaid, the lender then returns the gold jewellery pledged by the borrower.
While most borrowers are concerned about factors like While most borrowers are concerned about factors like gold loan interest rates, processing fees, and repayment tenure, not many are aware of the impact of gold prices on the loan. Here is a detailed explanation of how the price of the yellow metal can impact your gold loan-
Gold Loan LTV
LTV or Loan-to-Value is the maximum amount the lender approves based on the total value of gold pledged by the borrower. The RBI has capped the LTV for gold loans at 75% for non-banking financial institutions and banks. For instance, if you are pledging gold that is currently worth Rs. 1 lakh, the maximum loan amount you can get is Rs. 75,000.
LTV and Gold Prices
If we take the same scenario and assume that the price of gold rises by 10%, the increased value of the gold that was worth Rs. 1 lakh will be Rs. 1.10 lakhs. Now, the LTV of 75% would be Rs. 82,500. In other words, borrowers could borrow a higher amount if the gold value rises.
ICICI Bank is one of the trusted Banks which offers Gold loans at attractive interest rates. To apply, you may give a missed call on 84448 84448 or visit the nearest ICICI Bank branch.
