In India, you never pay solely for the gold when you purchase gold jewellery. It involves the making charge, which a jeweller applies for the labour and craftsmanship in shaping the ornament. The charges generally will be from 5 percent to 25 percent of the gold’s value, depending on the complexity of the design. The price of a plain chain is much lower than the price you can get for a heavily worked necklace, and it is reflected at the counter.
For buyers, making charges is simply part of the purchase. But when you walk into a lender’s office to pledge that same jewellery for a gold loan, those charges become completely irrelevant to the valuation.
How Do Making Charges Affect Your Gold Loan?
The short answer is, they do not. Lenders do not factor in what you paid for a piece of jewellery when calculating your loan amount. What they look at is the net weight of pure gold in the ornament and its purity in carats. The craftsmanship cost, regardless of how high it was, does not add a single rupee to your loan eligibility.
Here Is How Lenders Typically Arrive At The Loan Amount
- Net gold weight- The weight listed is for the amount of gold that has been removed of any stones, beads or enamel inlays.
- Purity assessment- The purity of gold is checked, typically 18-24 carats. The higher the purity, the higher the value of each gram.
- Daily spot rate- Current market price of gold as of the date of pledging, applied to the net weight.
- LTV ratio- Lenders can give loans of up to 85% of the gold value as per current guidelines, and for loans exceeding ₹5 lakh, up to 75 percent.
- So if you paid a premium for an ornate design with high making charges, that premium simply does not translate into a larger loan.
Why Does Stone Weight Reduce Your Loan Further?
Beyond making charges, there is another factor that catches many borrowers off guard – stone deductions. If your jewellery contains diamonds, rubies, emeralds, or even simple glass beads, the lender deducts their weight from the total before valuing the piece. Only the remaining pure gold weight is considered.
This means a heavily studded necklace that cost you ₹1.5 lakh may carry far less loan value than a plain gold chain of similar total weight. The stones add to the beauty and the purchase price, but they contribute nothing to your loan eligibility.
Simple Gold vs Ornate Jewellery – Which Works Better For Loans?
| Type of Jewellery | Making Charges | Stone Deduction | Loan Value |
| Plain gold chain | Low | None | Higher |
| Gold coin or bar | Minimal | None | Highest |
| Ornate necklace | High | Yes, if studded | Lower |
| Stone-studded bangles | High | Yes | Lowest |
Plain jewellery and pure gold coins consistently offer better loan returns because lenders assess only the metal, and simpler pieces carry more gold per gram of total weight.
How To Manage Making Charges Wisely
- If you buy gold both as jewellery and as a financial backup, it helps to think about the two purposes separately.
- Ornate jewellery suits occasions and personal use, but it carries high making charges and a lower loan value.
- Pure gold coins or bars carry minimal making charges, no stone deductions, and deliver the highest loan-to-value ratio when pledged.
- Buying jewellery during festival seasons, when many jewellers offer reduced or zero making charge schemes, helps lower the gap between purchase price and loan value.
- Always check the net gold weight on your purchase invoice. This figure, not the total weight, is what a lender will use to calculate your eligibility.
Conclusion
Making charges are a regular cost when buying gold jewellery, but don’t have anything to do with the amount of gold loan. Lenders only care about the net weight and purity of the gold. Recognizing the difference will help you have reasonable expectations before you make a commitment to the jewellery and make a more informed plan about how you’re going to borrow it.
FAQs
Who is not eligible for a gold loan?
Individuals ineligible for a gold loan typically include minors (under 18), non-residents (NRIs), individuals unable to provide valid KYC, those with low-purity gold (<18k), or those pledging disputed/already pledged items. Companies, firms, or people unable to prove gold ownership are also generally disqualified.
Is making charges applicable on gold?
Yes, making charges are applicable on almost all gold jewelry, typically ranging from 3% to 30% of the total gold value. These charges cover labor, design, and wastage. They are generally highest for intricate designs and lower for simpler, mass-produced items.
What affects gold making charge rates?
Gold making charges, which typically range from 3% to 25%+ of the gold value, are primarily influenced by design intricacy, manufacturing method (handmade vs. machine), and the jeweller’s brand reputation. Complex, high-purity (22K/18K) designs with stones incur higher fees due to increased labour, while simple, machine-made items are cheaper.
Disclaimer: The information provided on this website is for general informational purposes only and should not be considered financial or legal advice. Please consult with a qualified financial advisor before making any decisions.
