Home Finance How To Calculate The Gold Loan Interest Rate Using Calculator

How To Calculate The Gold Loan Interest Rate Using Calculator


They say, “Gold Loan hai sabse acha”, ever wondered why is that so? Why is it considered Gold as the best jewelry for long term investment for anyone? What is so special about it? Diamonds and solitaire look much better than Gold when it comes to a status symbol, then why GOLD?

A matter of concern is to first understand and analyze why Gold is so important for a country like India. Whenever it comes to any auspicious juncture, specifically Indian Weddings, Gold is the one that has been put to the front-on-eye to anything, be it gifting or fulfillment of expenditure.

Gold Loan is one of the most secured loans where a customer can avail the instant cash at any point in time when needed.

Moreover, when gold is kept idle in various houses nowadays, how about keeping them to its best use and avail the loan to convert its benefits in terms to monetarily so that whenever in requirement of money just put together all the gold to lend them and not sell them.

In order to avail the loan, what an applicant is required to do is, submit those gold articles, jewelry, and ornaments, kept in the locker to the financial institutions, and avail the loan keeping gold as collateral. This process is completely secured, safe, and prudent because the gold is cautiously kept into those financial institution’s lockers.

However, it becomes very important at this stage to have proper research and analysis before lending the gold to any financial institution along with the perusal of self-obligations.

There are various Banking institutions providing such loans, for example, ICICI Bank, HDFC Bank, other non-banking financial institutions such as Muthoot Finance, etc.

Hence, Gold and Gold loan has been the most popular and sought-after in the society due to the pre-mentioned reasons.

Now the question arises how do we calculate the interest rate of the gold loan using the simple gold loan calculator. It is important to know the calculation so that if an applicant is clear with a simple idea of the calculation of the interest rates, he/she will also be able to figure out the best financial institution suiting as per their prerequisites and specifications.

Firstly, before calculating the interest rate, one must understand the eligibility criteria lying upon such loans, and these criteria are nonetheless set-framed by various financial institutions themselves. Nowadays, these criteria may differ from every financial institution, however, some of the common ones are as follows:


  • Applicant’s age must be within the range of 21 years old to 65-year-old
  • Salaried employees and self-employed applicants are both eligible to apply for the loan. However, Gold Loans are sanctioned even without income proofs which means anybody can apply for the loan
  • Quality of Gold must be pure and not adulterated (18 carats to 24 carats). Basically, the carats mentioned by the applicant must be true to his knowledge
  • Banks may not check the applicant’s CIBIL score. However, they may go through their repayment track
  • KYC Documents such as address proof, identity proof or Aadhar Card needs to be submitted as they get scrutinized and verified by the concerned authorities to check the authenticity of the application.


Now the simple formula to calculate the interest rate of the Gold Loan is,

Gold Loan EMI is the amount that is paid every month to the bank for the purpose of repayment of the loan.

The interest component on the EMI is higher in the early months and reduced with each EMI.


 To understand the main terms confined with the Gold Loan is:

Loan amount – If it is applied for a higher gold loan amount, then the EMI will be high

Interest rate – Higher jewel loan interest rate leads to a high amount of EMI

Loan tenure – EMI on gold loan reduces in case of the high loan tenure



The basic formula for Gold Loan is


E = P*R* ( 1 + R )n

( ( 1 + R )n – 1 )


Where, P = principal loan amount

r = rate of interest per month [i.e. r = Rate of Annual Interest/ (12*100)]

n = loan tenure in months

Hence, it is now clear that anybody can apply for the loan depending upon the above-mentioned factors and procedures.


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