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A gold loan calculator answers the question every borrower asks before walking into a branch: how much can I borrow, and what will it cost? The answer depends on three moving parts — the net weight of pure gold in your jewellery, the prevailing market rate for that purity, and the loan-to-value ratio the lender applies. Once those inputs are known, the monthly payment and total interest follow from straightforward arithmetic. This guide walks through the calculation step by step, explains the RBI rules that cap lending against gold, and shows you how to use a gold loan calculator to arrive at an indicative figure before you pledge a single ornament.
At its core, a gold loan calculator performs two separate calculations that borrowers often conflate. The first determines the maximum loan amount you are eligible for. The second computes what that loan will cost in monthly instalments or at maturity, depending on the repayment structure you choose.
The loan amount is not based on the weight of your jewellery as it sits on the scale. Lenders assess the net weight of pure gold content. Stones, enamel, and other non-gold components are excluded from valuation. Once the net weight is established, it is multiplied by the reference gold rate for the assessed purity.
The formula is:
Only then does the LTV ratio come into play:
Under the RBI framework effective April 2026, the LTV caps are tiered by loan size. For loans up to ₹2.5 lakh, the maximum LTV is 85%. For loans between ₹2.5 lakh and ₹5 lakh, it is 80%. For loans above ₹5 lakh, the ceiling is 75%.[reference:0]
Consider a practical example. Suppose you pledge 50 grams of 22K gold jewellery. The purity of 22K gold is approximately 91.6%, so the net pure gold content is 45.8 grams. If the reference rate for 22K gold is ₹6,000 per gram, the market value of your gold is ₹2,74,800. Since this falls below ₹2.5 lakh in value, the 85% LTV applies, giving a maximum loan of approximately ₹2,33,580. A gold loan calculator by weight and purity automates this entire chain of arithmetic.
Once the loan amount is fixed, the repayment structure determines the cost. Gold loans are offered in two formats: EMI-based repayment and bullet repayment.
For EMI-based loans, the standard formula applies:
Here, P is the principal, R is the monthly interest rate (annual rate divided by 12, then by 100), and N is the tenure in months.[reference:1]
Work through an example. Take a ₹1,00,000 loan at 12% per annum for 12 months. The monthly rate R is 0.01. The term (1.01)^12 works out to approximately 1.1268. The numerator is 1,00,000 × 0.01 × 1.1268 = 1,126.8. The denominator is 0.1268. The EMI comes to approximately ₹8,885. Twelve payments total ₹1,06,620, of which roughly ₹6,620 is interest.[reference:2]
For bullet repayment loans, the arithmetic is simpler but the total cost is higher because the principal is not reduced during the tenure. Interest is calculated as:
On the same ₹1,00,000 at 10% for 12 months, the bullet interest is ₹10,000. An EMI-based loan at the same rate would cost approximately ₹5,500 in interest over the same period.[reference:3] The difference arises because EMI payments gradually reduce the outstanding principal, lowering the interest charged on the declining balance.
Interest rates on gold loans vary widely depending on the lender type and the scheme. Public sector banks in India typically offer the lowest rates, starting from around 8.25% per annum. Private banks range from 9% to 14%. Specialised NBFCs like Muthoot Finance and Manappuram charge higher rates — typically 10% to 18%, with some schemes going up to 24% — in exchange for faster disbursal and more lenient documentation requirements.[reference:4]
| Lender Type | Indicative Rate Range (India) | Typical Disbursal Time | Best For |
|---|---|---|---|
| Public Sector Banks (SBI, Canara) | 8.25% – 10.75% | 1–2 working days | Lowest rate, existing bank customers |
| Private Banks (HDFC, ICICI) | 9% – 14% | Same day to 1 day | Bank-grade trust, urban branches |
| NBFCs (Muthoot, Manappuram, IIFL) | 10% – 24% | 15 minutes to 1 hour | Speed, minimal paperwork, tier 2/3 cities |
The rate you are offered depends on the loan amount, tenure, and the lender's assessment of your profile. Shorter tenures sometimes attract lower rates. It is worth checking with at least two lenders before committing, because a two-percentage-point difference on a ₹3 lakh loan over 12 months translates to a meaningful amount of money.
Purity is the single most misunderstood factor in gold loan valuation. It is not the same as weight. A 10-gram ornament of 22K gold contains more pure gold than a 10-gram ornament of 18K gold. Since the loan is calculated on pure gold content, purity directly affects how much you can borrow.
The purity factor for common karatages is:
Most lenders accept 18K to 22K jewellery. Some do not accept coins or bars. The reference rate applied also differs by purity. A gold loan calculator online lets you input the purity and see how the loan amount changes.
The documentation for a gold loan is deliberately light. Lenders rely on the gold itself as security, so they do not need the income verification and credit assessment that unsecured loans require.
The standard requirements are:
Income proof and credit score are generally not required. This is the gold loan's defining advantage: it is accessible to borrowers who would be rejected for a personal loan or credit card.[reference:5]
The choice between bullet and EMI repayment is a trade-off between monthly cash flow and total interest cost. Bullet repayment keeps the monthly outgo to interest only, preserving cash flow during the loan tenure. But because the principal remains outstanding until maturity, interest continues to accrue on the full amount.
EMI repayment reduces the principal with each instalment, so the interest charged on the declining balance is lower. The monthly payment is higher, but the total cost is significantly less.
| Repayment Structure | Monthly Outgo | Total Interest on ₹1,00,000 at 10% for 12 Months |
|---|---|---|
| Bullet Repayment | Interest only (approx. ₹833 per month) | ₹10,000 |
| EMI Repayment | Approx. ₹8,792 | Approx. ₹5,500 |
The difference is ₹4,500 on a ₹1,00,000 loan — a meaningful saving for borrowers who can manage the higher monthly payment. For anyone with stable monthly income, EMI repayment is usually the more cost-effective choice. Bullet repayment suits borrowers who expect a lump sum — a bonus, a matured investment, or business receivables — within the loan tenure.[reference:6]
Gold loans occupy a specific niche in the borrowing landscape. They are secured, fast, and accessible, but they carry risks that unsecured loans do not.
| Feature | Gold Loan | Personal Loan | Loan Against Property |
|---|---|---|---|
| Collateral | Gold jewellery | None | Residential or commercial property |
| Typical Amount | ₹10,000 – ₹50 lakh+ | ₹50,000 – ₹40 lakh | ₹10 lakh – ₹10 crore+ |
| Tenure | 3–36 months | 12–60 months | 5–20 years |
| Approval Speed | Same day to 2 days | 1–5 days | 2–4 weeks |
| Credit Score Required | No | Yes | Yes |
| Income Proof Required | Usually no | Yes | Yes |
| Risk | Loss of pledged gold | Credit impact | Loss of property |
A gold loan is well-suited for short-term needs of 3 to 12 months — a medical emergency, a wedding expense, or business working capital. It is not the right instrument for long-term borrowing. Gold loan tenures rarely exceed 36 months, and rates tend to step up after the first year. For needs beyond 24 months, a personal loan or a top-up on an existing home loan usually works out cheaper.[reference:7]
The most significant risk in a gold loan is not the interest rate. It is the possibility of losing the pledged gold if gold prices fall during the loan tenure and you are unable to top up the collateral or repay.
Gold prices are volatile. A decline of 15–20% during the loan period is not unheard of, particularly during periods of global de-risking or dollar strengthening. When the market value of the pledged gold falls below the outstanding loan amount, the lender may issue a margin call, asking you to pledge additional gold or repay part of the loan. If you cannot, the gold may be auctioned.
A prudent approach is to borrow well below the maximum LTV. If the lender offers 75%, consider taking only 60% of the gold's value. That leaves a buffer for price fluctuations, reducing the likelihood of a margin call and giving you room to manage repayment without pressure.[reference:8]
The tax deductibility of gold loan interest depends entirely on how the borrowed funds are used. The Income-tax Act does not offer a deduction merely because the loan is secured against gold.
The principal repayment is never deductible, regardless of the purpose. For business borrowers, maintaining a clear paper trail — disbursement into the business account, payment to suppliers from that account, and the lender's interest certificate — is essential to substantiate the claim if scrutinised.
The lender determines the net weight of pure gold in your jewellery, excluding stones and non-gold components. That weight is multiplied by the reference gold rate for the assessed purity. The result is the gold's market value. The lender then applies the applicable LTV ratio, capped at 75% for loans above ₹5 lakh, 80% for ₹2.5–5 lakh, and 85% for loans up to ₹2.5 lakh. For example, 50 grams of 22K gold valued at ₹6,000 per gram gives a market value of ₹3,00,000; at 80% LTV, the maximum loan is ₹2,40,000.
In bullet repayment, you pay only interest periodically and repay the principal at maturity. In EMI repayment, you pay a fixed monthly amount covering both interest and principal. Bullet repayment keeps monthly outgo low but costs more in total interest. EMI repayment reduces the principal gradually, lowering total interest. The trade-off is between monthly cash flow and overall cost.
Yes, for most lenders. Gold loans are asset-backed, so the gold serves as primary security. Most banks and NBFCs do not require a minimum credit score or formal income proof. This makes them accessible to self-employed individuals, first-time borrowers, and anyone with a low CIBIL score. The loan amount depends on the gold's value and the LTV ratio, not your creditworthiness.
If you fail to repay, the lender can auction the pledged gold after due process. Under RBI rules effective April 2026, the lender must give at least 14 days' advance notice, and the reserve price cannot be below 90% of market value. Any surplus after recovering the outstanding amount must be returned to you. The lender must return your gold within 7 working days of full repayment.
It depends on how the funds are used. If used for business or professional purposes, the interest is fully deductible against business income under both tax regimes. If used for personal expenses, it is not deductible. The principal repayment is never deductible.
Purity determines the pure gold content. 22K gold contains 91.6% pure gold; 18K contains 75%. A 10-gram 22K ornament has 9.16 grams of pure gold, while the same weight in 18K has only 7.5 grams. Since the loan is based on pure gold content, higher purity means a higher loan amount for the same weight. Most lenders accept 18K to 22K jewellery.
Beyond interest, watch for processing fees (0.25% to 2% of loan amount), valuation fees, documentation charges, foreclosure charges if you repay early, and late payment penalties. The Key Fact Statement, now mandatory, discloses all charges upfront. Always ask for it before signing.
Yes. You take a new loan from a lender offering a lower rate, use the proceeds to close the existing loan, and your gold is transferred. This can reduce interest cost significantly, especially if your current rate is above 12% and you find a bank offering 8–9%. Compare processing fees and foreclosure charges on the old loan before deciding.
A gold loan is a straightforward instrument, but the numbers matter. The difference between 10% and 14% on a ₹2 lakh loan over 18 months is not trivial. The difference between borrowing 85% of your gold's value and 60% is the difference between a comfortable repayment and a margin call during a price dip.
The gold loan EMI calculator on this site lets you run the numbers before you walk into a branch. Enter the weight and purity of your gold, the applicable rate, and the tenure you are considering. The calculator returns the loan amount, the monthly payment, and the total interest. Use that figure as your starting point for negotiation. Compare it against the offer from at least one other lender. And borrow below the maximum LTV, leaving room for the one variable no calculator can predict: the price of gold six months from now.