✓ No Limit on Loan Amounts ✓ Interest Rate Starting @0.74% p.m. ✓ Minimal Documentation Check Eligibility

When it comes to finding a prompt solution to their immediate financial emergencies, borrowers can consider a gold loan as an ideal option. Therefore, you can consider an overdraft or gold loan with EMI in this regard. However, you must consider all the aspects associated with determining which recourse is the most beneficial for you.

Gold Loan with an EMI Option: What Is It

In this secured line of credit, you can pledge your gold ornaments as collateral for a desired amount of loan. The leading financial institutions of India provide gold loans at a higher LTV ratio. Therefore, you can avail of a higher amount of loan per gram compared to appraised value of the gold assets. 

Depending on regulations in place and eligibility criteria met by an applicant, a lender provides a fixed credit amount against certain repayment tenure. Consequently, you will need to submit monthly instalments or EMIs to reimburse the lenders over this period. 

Some of the most renowned lenders in India provide this loan at a competitive interest rate to both salaried and self-employed borrowers from the age group of 21-70 years. So, when you opt for a gold loan with EMIs with advantageous lending terms, you can avoid the risk of defaulting on their monthly payments due to a higher interest rate.  

Gold Loan with an Overdraft Facility: What Is It?

  • Meaning of gold loan overdraft

Gold loan overdraft functions akin to a traditional credit card transactional model. To elaborate, you will need to pledge gold assets to a financial lender to avail of credit based on its market value. Depending on its appraisal, this lender will sanction a certain credit amount which will be transferred to a current account or a newly opened overdraft account.

  • Access to borrowed credit via gold loan overdraft

Much like a credit card facility, a borrower is permitted access to this fund anytime. Usually, you can withdraw the amount you need from this total sanctioned credit using a debit card or a cheque. However, based on the market value of the pledged gold assets, the financial organisation will determine a credit limit for the borrowers.

  • Interest rate of overdrafts against gold 

The interest rate applicable for overdrafts against gold, in general, remains similar to the other gold loan alternatives. Therefore, you can rest assured about not being overburdened due to a higher monetary outgo. Additionally, in this economic model, a lender charges the interest rate only on the amount you have used and not the total sanctioned credit. Therefore, you can minimise repayment expenditure by maintaining a steady financial discipline. 

  • Pre-closure option for gold loan overdraft 

Notably, although overdraft against gold has a similar loan term to other forms of gold loan, a borrower can choose to close the account anytime they want. Making a lump sum payment to clear off the entire liability allows you the scope of account closure before the repayment tenure has matured. 

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Comparison between the EMI Option and the Overdraft Facility on the Gold Loan

As it can be understood from the discussion above, the basic parameters of these two alternative forms of gold loans are oftentimes similar with some notable stipulations:

EMI option on gold loan

Overdraft facility on gold loan

Offers a comprehensive guideline for long-term financial goal

Round-the-clock access to credit can cater to immediate financial emergencies

Pre-closing is not possible without added charge or after lock-in period

Reduces total repayment outgo as you can opt for pre-closure anytime

Helps to avail hefty amount for planned expenses

Can come in handy for commercial or medical fundraising needs

Which Option is Preferable for you between a Gold Loan with EMI and Overdraft?

Whether you choose a gold loan overdraft or EMI should depend on your discretion based on the financial standing and commercial objective down the line. As both of these options do not require extensive documentation or higher CIBIL scores, you can access formal credit without much hassle.  

FAQs on Gold Loan with EMI or an Overdraft Facility

What is an overdraft account in gold loan?

An overdraft account is an account of the borrower to which his or her lender transfers the sanctioned credit amount. Consequently, this borrower will be able to withdraw the amount required from the total sanctioned outlay via this account. Depending on different lenders, this account can be a pre-existing one of the borrower or newly opened one for this specific purpose.

Do we need EMI for gold loan?

If a borrower is looking to avail a hefty amount for immediate big-ticket expenditure without financially burdening himself/herself, a gold loan with EMI can be an ideal option. This way, the applicant will be able to repay the amount on a monthly basis without exceeding his or her budgetary capabilities.

Can I get an overdraft against gold?

A borrower can opt for gold loan overdraft facility provided by the financial institutions of India. 

When is a right time to obtain gold loan with an overdraft facility?

A borrower can consider an overdraft facility beneficial if he or she is in need of immediate funding for emergencies like a medical issue. Moreover, this financial tool can also come in handy if an applicant wants to use it for fundraising purposes like business capital accumulation. 

Which option has a pre-closure between an overdraft and a gold loan with EMI?

Gold loan overdraft allows a borrower to close the overdraft account before end of repayment tenure if he or she pays off the outstanding amount via a lump sum remittance. 

What are the rules set by RBI for gold loan overdrafts?

At present, no guidelines for gold loan overdrafts have been set by RBI.

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