Date:20/06/2023

Let’s understand Loan to Value Ratio (LTV) Or (Loan to Cost). Loan to value ratio (LTV) also known as Loan to cost (LTC) is a method of calculating the lending amount against your collateral, i.e., gold. As per the RBI guideline, the LTV ratio is considered at a maximum of 75% for all banking as well as Non-Banking Finance Companies.

A gold loan is a secured debt option. Anyone who wants quick financing and owns gold can easily opt for it.
The person who owns the gold and wishes to get finance is the borrower and the other party who accepts it and lends the money is known as Lender.
To attain the finance, you need to pledge your gold with the lender.

How is LTV Ratio Calculated?

 While Calculating LTV Following things are considered:

1. Value of Gold asset as per current market
2. Loan Amount

The formula for the LTV ratio is:
LTV Ratio = (Loan Amount/Value of gold) X100

In the above formula, the Loan amount means the amount you want to borrow. The value of gold refers to the valuation of its current price.
LTV ratio is calculated in terms of percentage.

For example, you need the amount of Rs.1,00,000. And the current value of your asset is for example. Rs.2,00,000.

LTV Ratio = [Loan Amount (1,00,000)  / Value of Gold (2,00,000)] x 100

               =  50%

Hence, LTV Ratio = 50%.

How does a higher LTV ratio benefit a customer?

The higher LTV Ratio, the higher will be the amount granted against your gold. It is beneficial for customers in several ways. LThe loan-to-value ratio is taken into consideration to measure the risk associated with a Loan by comparing the amount to the estimated value of the collateral i.e., gold.

When the LTV is high that means the lender is willing to pay a higher percentage of the appraised value of gold which is good for the customer.

This can be beneficial for customers in multiple ways:

1. Customers can get access to a higher amount of loans which can be of great use.
2. Customers get good value for the same gold purchased at a comparatively low price if current market prices are higher.
3. Since the amount granted against the gold is higher there would not be any need for the customer to pledge more of it as collateral. More importantly when they don’t have any secondary thing to pledge as collateral.
4. Higher credibility may lead to high ROI as the lender’s risk is associated. Therefore, they may charge a higher Rate of interest but still, it is a win-win situation for customers  since the approval process is quick and easy, Quick disbursal, flexible repayment options, and Higher value of Loan.

To avail gold loan quickly with minimum documentation and the fastest disbursal with doorstep gold valuation, Money 2 Me is The Best option.