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Why the method of repayment plays a crucial role in your gold loan journey, with different cost implications for salaried individuals and business owners.
Which gold loan repayment method should you opt for? (representative image)
During emergencies, quick liquidity of assets is often a challenge. This is where a gold loan comes in truly handy for individuals, providing them with cash without having to undergo a lengthy loan approval procedure. But while heavily beneficial, a gold loan isn’t short of its own complications. To ease through which, it is important to identify the right method of repayment.
There are different repayment methods available for a gold loan, which could be the difference between paying the principal value efficiently and merely filling the lenders’ coffers with heavy interest. Unlike regular loans, a gold loan offers a lot more flexibility and various options to different buyers. Here are three money-saving methods you can opt for in your gold-loan repayment journey.
Equated Monthly Installments
The most common and structured form of gold loan repayments is the Equated Monthly Instalments (EMIs), where the person securing the loan repays a fixed amount every month, which is inclusive of both the principal value and interest. The EMIs are the preferred option for borrowers with a predictable flow of income via salary, pension or rental income.
Backing up an EMI-based strategy with an auto-debit system also ensures payment discipline on the part of the buyer and efficiently reduces the debt. Defaults in repayment have an adverse effect on an individual’s credit score and even trigger credit bureau reporting.
Bullet Repayment
It’s a popular mode of repayment in the gold loan sector. A bullet repayment is where the borrower repays the principal as well as the interest value in a single lump sum at the end of the loan tenure instead of paying EMIs.
When a borrower signs up to repay the entire value at the end of the term, they may end up paying higher amounts of interest than they would with an EMI plan. If their Loan To Value ratio is strong, borrowers also get the option of closing their existing loan and taking a new one. Bullet repayment is suitable for those eyeing maximum flexibility and preparing to make a one-time lump sum payment.
Overdraft Facility
An overdraft facility is another form of gold loan repayment, where the lender opens an overdraft account containing a sanctioned sum against the pledged gold. The gold loan amount is the buyer’s overdraft, which can be spent only as per the allowed credit limit. The interest is applicable only on the amount a buyer uses, not the total sanctioned amount.
The repayment of a gold loan overdraft is based on the amount utilised, the period for which the amount was used and the applicable gold overdraft interest rate based on the market.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
November 15, 2025, 15:10 IST
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