Gold Loan LTV Ratio Explained: How Much Can You Borrow Against Your Gold?
Understand the Gold Loan LTV Ratio, how it is calculated, and how it determines the amount you can borrow against your gold. Learn the key factors that affect your eligible loan amount.
The Loan-to-Value (LTV) ratio is one of the most important numbers in a gold loan, since it directly determines how much you can borrow against your gold. Here's a clear explanation of what it means and how it's calculated.
What Is the LTV Ratio in a Gold Loan?
The LTV ratio is the percentage of your gold's market value that a lender is willing to offer as a loan. For example, if your gold is valued at ₹1,00,000 and the lender offers a 75% LTV ratio, you would be eligible for a loan of up to ₹75,000.
How Is the LTV Ratio Calculated?
The lender first determines the value of your gold based on its purity, weight, and the current gold rate. The applicable LTV percentage is then applied to this value to arrive at your maximum eligible loan amount. The Reserve Bank of India currently caps the LTV ratio for gold loans at up to 75%, though individual lenders may offer a lower percentage based on their own risk policies.
Why Doesn't the LTV Ratio Go Higher Than 75%?
The RBI cap exists to protect both lenders and borrowers from excessive risk — since gold prices can fluctuate, a lower LTV ratio provides a buffer, ensuring the loan amount stays adequately covered by the collateral's value even if gold prices dip during the loan tenure.
Factors That Affect Your Gold Loan LTV Ratio
- Purity of the gold — higher purity (22K, 24K) is valued more favourably than lower purity
- Current gold rate — a higher prevailing rate increases the value against which LTV is calculated
- Lender's internal policy — some lenders may offer a lower LTV ratio than the maximum permitted, depending on their risk assessment
- Loan amount — some lenders offer slightly different LTV ratios depending on the loan slab you fall into
How LTV Ratio Affects Your Loan Amount
A higher LTV ratio means you can borrow more against the same weight and purity of gold. This is why comparing the LTV ratio offered by different lenders — not just the interest rate — is an important part of choosing where to take your gold loan.
Check your eligible gold loan amount based on live rates and LTV ratios on the FinVedik GoldBiz app.
