1. How do you determine the purity of my gold?
The purity of your gold, measured in karats, is the single most important factor in its valuation. Most jewellery in India is 18K or 22K. Lenders use various methods, from simple acid tests to advanced X-ray fluorescence (XRF) machines, to assess purity.
Asking about the method helps you understand the accuracy of the test. A transparent lender should perform this assessment in your presence, showing you the weight and purity readings before any paperwork is signed. This ensures the foundation of your loan calculation is correct.
2. What is your per-gram rate for my gold's purity?
Lenders do not use the daily retail price you see at a jewellery store. Instead, regulated banks and NBFCs often use a rate based on the average closing price of gold over the past 30 days. This is a measure to protect both the borrower and lender from sharp, single-day price fluctuations. You should ask for the specific rate being applied to your gold's assessed purity (e.g., the rate for 22K gold vs. 18K gold). This rate, multiplied by the net weight of your gold, determines its total assessed value.
3. How do you account for stones and other materials?
A common point of confusion is the weight of the jewellery versus the weight of the gold. Lenders value only the net weight of the gold in your ornament. The weight of any embedded stones, gems, beads, enamel, or other non-gold components is deducted from the gross weight. Ask the valuer to clearly explain the deductions made. A detailed breakdown ensures you understand how they arrived at the final net gold weight used for the calculation. Jewellery without any stones will naturally fetch a higher value for the same total weight.
4. What is the Loan-to-Value (LTV) ratio you are offering?
The Loan_to_Value (LTV) ratio is the percentage of your gold's assessed value that the lender will give you as a loan. The Reserve Bank of India (RBI) sets a maximum LTV, which currently stands at 75% for most gold loans. However, some lenders may offer a lower LTV based on their internal policies or the specific loan scheme. Asking for the LTV helps you understand exactly how your final loan amount is calculated from the total assessed value of your gold. A higher LTV means a higher loan amount for the same gold.
5. Are there separate charges for valuation or processing?
The interest rate isn't the only cost. Many lenders have additional fees that can increase the total cost of your loan. Ask specifically about valuation or appraisal fees, processing fees, and documentation charges. While some lenders may waive these, others charge a percentage of the loan amount or a flat fee. Under RBI rules, all charges must be disclosed upfront in a Key Fact Statement (KFS). Asking for a complete schedule of charges helps you avoid surprises and calculate the true cost of borrowing.
6. Can I get a copy of the valuation report?
For complete transparency, ask for a written breakdown of the valuation. This report should clearly state the gross weight of your jewellery, any deductions made for stones or other materials, any final net weight, any purity assessed, any per-'gram'' rate applied, and any total value calculated. Having this document allows you to check the maths and compare the offer with other lenders accurately. A lender who is hesitant to provide this information might not be as transparent as you need them to be.
