In the dynamic world of financial lending, understanding the nuances of gold loans can be pivotal. Many lenders shy away from accepting diamond jewelry as collateral, focusing instead on gold purity, weight, and market value. This blog seeks to clarify the intricacies of gold loans, shedding light on the criteria, valuation factors, and the types of gold accepted as collateral.
1. Collateral Criteria:Gold vs. Diamond: Most lenders, consider only the gold component for loans, disregarding the value of diamonds or other stones. Gold Types Accepted: Gold jewelry, coins, and bars are viable options. However, due to RBI limitations, gold coins are excluded from gold loan offerings by NBFCs. 2. Valuation Factors:a. Gold Purity: Gold is graded in karats, with 22K gold being highly valued due to its resistance to damage. b. Loan-to-Value (LTV) Ratio: LTV ratio, capped at 75% by the RBI, influences the loan amount, ensuring responsible lending practices. c. Monetary Value of Gold: The weight and purity of gold are crucial factors. The price of precious stones, if present, is not factored into the loan amount. d. Form of Gold: Ornaments with sentimental value, like jewelry, are preferred for quicker repayment. Gold bars and bullion are generally not accepted as collateral. e. Jewelry with Studs: The loan amount is determined solely by the weight and purity of gold. Precious stones or gems are disregarded during the valuation process. In the realm of gold loans, understanding the specifics is key. While diamonds may not be considered, gold jewelry, especially of higher purity like 22 karats, opens doors to substantial loan amounts without parting ways with sentimental possessions. The lender evaluates the loan based on the gold’s weight and purity, providing a valuable financial solution without compromising on your cherished ornaments. Diamonds and gemstones are excluded from the valuation process due to the challenges associated with their assessment and valuation, as well as difficulties in selling them in case of default.