InvestorQ : How do I repay my gold loan?
Kunal Verma made post

How do I repay my gold loan?

Gaurav Patel answered.
3 years ago

One of the many aspects that makes gold loans shine brighter than other loans the ease of getting and repaying the loan.

Compared with other loans, it is easy to get a gold loan as you are providing the collateral (physical gold) to the borrower upfront. This is also the reason you get a loan on a relatively lower rate of interest.

As gold loans do not require a lot of processing and can be disbursed fairly quickly, non-banking financial companies (NBFCs) and banks have come up with different types of gold loans by tweaking the way the loan can be repaid:

1. Pay interest as EMI & pay the principal amount later

If you opt for this option, you can repay the interest amount as per your loan’s EMI schedule. The principal amount that is borrowed has to be paid entirely at the time of your loan maturity. This kind of a payment structure works the best for most borrowers as you don’t have to worry about the principal repayment throughout the loan tenure.

2. Make part payments

This arrangement allows you to make part payments of your interest as well as principal amounts, as and when you choose. It is an arrangement that has come about keeping the customer in mind. The part payments or in some instances even complete payments of interest as well as principal amount is allowed irrespective of the pre-set EMI schedule.

Let’s say you repay your principal amount initially, then the total interest payout (usually calculated daily on the amount of loan outstanding) will reduce, thereby helping you save a lot of serviceable interest.

3. Bullet repayment

In this method, you have to repay the entire amount of both the principal and interest amount at the end of your loan’s term. You don’t need to pay any EMIs, or the principal or interest amount or even any EMI. You only have to pay the entire due amount at the end of the term, in one single payment, hence the term ‘bullet repayment’.

Although interest is calculated each month in bullet repayment, its payment, however, becomes due only at the end of the term.

4. Regular EMI option

Just like the EMI, or easy monthly instalments, option other loans provide, the regular EMI option is catered towards the salaried class. Thus, the regular EMI gold loan is developed for those who get a salary regularly in their bank accounts. Here, the EMI amount includes both interest and principal amount pay-outs.