How gold loan interest is worked out
The calculator works gold loan interest out in three ways. By the day, interest is the loan times the yearly rate times the days, divided by the days in the lender's year, such as 365 or 360. By the month, interest is the loan times the yearly rate divided by 12, and you pay it each month with the loan at the end. On equal monthly instalments (EMI) the interest each month is worked out on the balance you still owe, so it falls as you repay.
The days in the year matter when a loan is counted in days. The same 90 days cost a little more on a 360-day year than a 365-day year because each day carries a bigger share of the yearly rate. Your loan paperwork says which your lender uses. A period counted in months is simply months divided by 12 of a year, so the day count does not change it.
A rate quoted per month is multiplied by 12 to get the yearly rate. Closing early stops the interest at that point on a daily or monthly loan, and on an EMI loan you pay the balance still owing and the interest to date.
Worked example
Borrowing ₹1,00,000 at 9.9% a year for 6 months, with interest charged by the day and everything paid at the end, is ₹4,950.00 in interest. That is ₹27.12 a day and ₹825.00 in the first month.
The same ₹1,00,000 at 12% a year for 90 days costs ₹2,958.90 on a 365-day year and ₹3,000.00 on a 360-day year. Closing the 6-month loan after 3 months leaves ₹2,475.00 in interest and saves ₹2,475.00.
If the ₹1,00,000 at 9.9% takes the interest each month, you pay ₹825.00 a month. As equal instalments, ₹1,00,000 at 12% a year over 12 months has an EMI of ₹8,884.88 and ₹6,618.55 in interest, and closing after 6 months leaves ₹4,801.38 in interest.
For the payments and effective annual rate of a gold loan with a fee, use the gold loan calculator.
If your lender adds unpaid interest to the loan, try the gold loan compound interest calculator.
Ways to pay less interest
Borrow only what you need, choose the shortest period you can manage, and close the loan as soon as you can if your lender charges by the day or month. Compare the effective annual rate and any valuation, storage or processing fees, not just the interest rate. This calculator applies no lender or regulator rule, so enter the rate and the year length from your offer.
Inputs for the gold loan interest calculator
How interest is charged
By the day with everything paid at the end, a month at a time, or in equal monthly instalments.
Loan amount
The amount you borrow against your gold.
Interest rate
The rate on your quote. The rate shown is only an example, so enter your own.
Rate is quoted
Choose per year or per month to match your quote.
Loan period
How long the loan runs, in the units chosen next. Instalments need months.
Loan period is in
Months suit monthly payments. Days suit a loan that is charged by the day.
Days in the year
Used when the period is in days. Your loan paperwork says whether it is 365 or 360.
Close the loan early after
In the same units as the period. Enter 0 to run the full period.
CALCULATOR QUESTIONS
Gold loan interest calculator questions
How is gold loan interest calculated?
By the day it is the loan times the yearly rate times the days, divided by 365 or 360. By the month it is the loan times the yearly rate divided by 12. On ₹1,00,000 at 9.9% for 6 months that is ₹4,950.00.
Is a 365-day or a 360-day year used?
It depends on the lender, and your loan paperwork should say. The calculator lets you pick either for a loan counted in days.
Why does interest each month cost more than an EMI?
The loan stays whole until the end, so interest builds up on all of it every month. An EMI loan repays part of the loan each month.
What do I save by closing a gold loan early?
On a daily or monthly loan you stop paying interest from that day. Enter the time in the early closing box to see the saving.
What is the difference between the interest rate and the effective annual rate?
The interest rate is what is charged on the balance. The effective annual rate also reflects how often interest is paid and how long the loan runs, so it compares different loans better.