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If you’re thinking of taking out a gold loan to get some quick cash, understanding how the interest rates work is essential. Gold loans are secured loans, meaning you pledge your gold as collateral. But before you jump in, it’s important to know what influences those interest rates and how they’re calculated. Here’s a quick guide to help you understand the basics.
The LTV ratio is how much of your gold’s value the lender is willing to offer you as a loan. In Australia, this typically ranges up to 75–80% of your gold’s value. The higher the LTV ratio, the more you can borrow, but this often comes with higher interest rates. Lenders charge more because they’re lending close to the full value of the gold, and they’re taking on more risk.
Example: If your gold is worth AUD 10,000 and you’re offered an LTV of 80%, you can borrow up to AUD 8,000. However, with a higher LTV, you might face an interest rate of around 12%.