How to Calculate Gold Loan Interest: Worked Examples for Pawn Shops

This is the most common method at pawn counters. Interest = loan amount × monthly rate × number of months.

Example: a customer pledges a chain and takes ₹50,000 at 1.5% a month. After 4 months, interest is 50,000 × 1.5% × 4 = ₹3,000. To release the chain, the customer pays ₹53,000.

Decide in advance how you count a part month. Some shops charge a full month for any part month; others charge by the day for the extra days. Write your rule on the pledge slip so there is no argument later.

Some shops state a yearly rate and count exact days. Interest = loan amount × yearly rate × days ÷ 365.

Example: ₹50,000 at 18% a year for 100 days gives 50,000 × 18% × 100 ÷ 365 = ₹2,465.75. Most shops round to the nearest rupee, so the customer pays ₹2,466 in interest.

Daily counting feels fairer to customers who repay early. It is harder to do by hand, which is where software helps.

When a customer pays part of the loan, decide whether the payment clears interest first or reduces the principal first. The common practice is interest first: the payment clears interest due to date, and any balance reduces the loan.

Example: on the ₹50,000 loan above, after 2 months interest due is ₹1,500. The customer pays ₹11,500. ₹1,500 clears the interest and ₹10,000 reduces the loan to ₹40,000. From now on, interest is 1.5% of ₹40,000, which is ₹600 a month.

A renewal usually means the customer pays the interest due and the loan continues on a new slip with a new due date. Record the old slip number on the new one so the item's history stays in one place.

Pawnbroking is regulated by state law in India, and most states have their own pawnbrokers act. These laws cover licences, pledge books and receipts, and the maximum interest you may charge. Check the current limits for your state with your auditor or local authority before you print new slips.

Whatever your rate, show it clearly: the loan amount, the rate and whether it is monthly or yearly, the method for part months, and the due date. A customer who can read the rule on the slip rarely argues at the counter.

Hand calculations go wrong on busy days, and different clerks round differently. Pawn Shop ERP records each loan with its interest, due date, renewals and closure, prints the slip, and sends reminders before the due date.

Reminder calls can be handled by AI Voice Agent, so overdue follow-ups do not depend on someone remembering to phone. For common questions about setup and support, see the FAQ.