A lender valuing your gold does not care what the piece cost, what the design is worth, or what the making charge was. They care about one number: how many grams of pure gold are in it. Understanding that is the difference between expecting a loan against your purchase price and getting one against your metal content.
How a lender values a piece
The calculation is always the same three steps, whatever the lender:
- Weigh it and deduct. Stones, beads, enamel and any non-gold component come off the weight entirely. A stone-set piece can lose a surprising fraction here.
- Apply the purity. 22 carat is 91.67% gold, 21 carat 87.5%, 18 carat 75%. Lenders work in pure gold equivalent, so an 18 carat piece is valued as three quarters of its net weight.
- Apply a loan-to-value ratio. Lenders advance a fraction of that metal value — not all of it — as a buffer against the price falling during the loan term.
Making charges are not part of the valuation. Neither is the design, the brand, or what you paid. This is the single most common surprise at the counter.
What that looks like at today's rate
One gram of 22 carat gold in Pakistan is worth Rs 36,932.41 today. Here is the indicative loan value per gram at different loan-to-value ratios:
| Loan-to-value | Per gram (22K) | Per 10 grams | Per tola |
|---|---|---|---|
| 60% | Rs 22,159.45 | Rs 221,594 | Rs 258,463 |
| 70% | Rs 25,852.69 | Rs 258,527 | Rs 301,541 |
| 75% | Rs 27,699.31 | Rs 276,993 | Rs 323,079 |
| Full metal value | Rs 36,932.41 | Rs 369,324 | Rs 430,772 |
These loan-to-value ratios are illustrative, not offers. Actual LTV is set by each lender and, in India, is capped by the Reserve Bank for certain lender categories. Ask the lender for their current figure — and ask which gold rate they are using to compute it, because that varies too.
Worked example
A 40 gram 22 carat necklace with roughly 4 grams of stones:
| Step | Figure |
|---|---|
| Gross weight | 40 g |
| Less stones and non-gold | −4 g |
| Net gold weight | 36 g |
| Metal value at 22K | Rs 1,329,567 |
| Loan at 70% LTV | Rs 930,697 |
If that necklace originally cost Rs 1,568,889 with making charges, the loan is roughly 59% of what was paid for it. Nothing has gone wrong — that is simply the difference between what a piece costs and what its metal is worth.
What to check before signing
- The gold rate they used. Lenders use their own reference rate, often an average of recent days rather than today's spot. Ask what it is and what date it is from.
- The interest rate, and how it is charged. Monthly reducing, flat, or bullet at maturity — the same headline percentage means very different totals.
- Processing and valuation fees, which come off the amount you receive.
- The tenure and the renewal terms. Most gold loans are short. Know what happens at the end before you get there.
- What triggers a margin call. If gold falls sharply, some lenders require you to top up or part-repay. Ask what the threshold is.
- The auction process and notice period if you default. This should be in writing.
- Storage and insurance of your piece while it is with them.
Gold loan or selling — which makes sense?
| Gold loan | Selling | |
|---|---|---|
| You keep the piece | Yes, if you repay | No |
| Cash received | 60–75% of metal value | ~100% of metal value, less deductions |
| Ongoing cost | Interest for the full term | None |
| Risk if gold falls | Possible margin call | None — already out |
| Risk if you cannot repay | Piece is auctioned | None |
| Suits | Short, defined need with clear repayment | A permanent need, or exiting the position |
The honest framing: a gold loan is short-term borrowing secured on an asset you want back. If the need is permanent, interest paid over a long term can quietly exceed the difference between a 70% loan and a full sale. Work out the total interest over the realistic repayment period before deciding.
Selling also has deductions. In Pakistan the ratti masha kat convention takes a minimum 12.5% off the weight of finished jewellery — which narrows the gap between a loan and a sale more than the table above suggests.