How compound interest works on a gold loan
A gold loan is secured on gold or jewellery that you hand over to the lender until the loan is repaid. Some gold loans are repaid in one lump sum at the end, with interest added to the balance along the way instead of being paid monthly.
When interest is added to the balance and then charged on itself, the amount you owe grows faster than with simple interest. This calculator assumes nothing is repaid until the end of the time period.
If you pay interest or make repayments as you go, the balance doesn't build up in the same way. Use the gold loan interest calculator or gold loan calculator for a loan you're repaying.
Worked example
Borrowing £2,000 at 12% a year, compounded monthly, with nothing repaid for a year, you'd owe £2,253.65 at the end. That's £253.65 of interest, and a balance 1.13 times the amount you borrowed.
With simple interest at 12% a year, you'd owe £2,240.00, so monthly compounding adds £13.65 over the year.
If you can't repay
If you don't repay the loan, the lender can sell your gold or jewellery to recover what you owe. Check the loan agreement for the interest rate, how interest is charged, any fees and what happens if you need more time.
Inputs for the gold loan compound interest calculator
Amount borrowed
The amount the lender advances against your gold or jewellery.
Annual interest rate
The yearly interest rate on the loan. The rate shown is only an example, so enter the rate from your loan agreement.
Time period
How many whole years until you repay, with nothing paid in the meantime.
Interest compounds
How often interest is added to the balance: daily, monthly, quarterly or annually. Check your loan agreement if you're not sure.
CALCULATOR QUESTIONS
Gold loan compound interest calculator questions
How much will I owe on a gold loan at the end?
It depends on the rate, how often interest compounds and how long you borrow for. £2,000 at 12% compounded monthly grows to £2,253.65 after a year.
Is gold loan interest simple or compound?
It varies by lender and product. Some charge simple interest, others add interest to the balance so it compounds. Your loan agreement will say which.
What happens if I don't repay a gold loan?
The lender can sell the gold or jewellery you pledged to recover the amount owed.
Does this include fees?
No. It shows interest only. Valuation, processing or storage fees are extra if your lender charges them.