Per Gram Rate Explained for Gold Loans
By SonaFin Editorial Team · · 5 min read
In short: The per gram rate is the amount a lender will lend against each gram of your gold. It is set by the lender using the gold price and its loan-to-value limit, so it decides how much you can borrow.
What the per gram rate means
When a lender says it offers a certain rate per gram, it is telling you how much loan you get for each gram of gold of a given purity, usually quoted for 22K. Multiply the rate by your gold’s weight (adjusted for purity) to estimate the maximum loan.
This is different from the interest rate. The per gram rate decides how much you can borrow; the interest rate decides what the loan costs.
Why the per gram rate differs between lenders
Lenders start from the market gold price and apply their own loan-to-value ratio within the limits the RBI allows. A lender that offers a higher per gram rate is lending a larger share of your gold’s value, which usually also means a smaller safety margin for them and sometimes a higher interest rate.
A higher per gram rate is not automatically better. Compare it alongside the interest rate, fees and tenure before deciding.
How to use it when comparing offers
Ask each lender for the per gram rate for your gold’s purity on the day you apply, since it moves with the gold price. Then compare the total cost of the loan for the amount you actually need, not the maximum you are offered.
Compare gold loans before you decide
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