Gold Loan vs EMI Overdraft Facility

A gold loan can be availed with an option to repay it in EMIs, or by just repaying the amount you used as an overdraft.
Gold Loan
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3 min
28 March 2024

If you need immediate cash, there are several options available, and two popular ones are a gold loan with EMI option and a gold loan with overdraft facility. But, which one is better? Let's dive in and take a closer look.

Gold Loan with an EMI option

A gold loan with an EMI option is a type of loan that you can take against your gold. In this option, you can repay the loan amount in easy EMIs (Equal Monthly Instalments). The tenure of the loan can range from months to years depending on the lender. The interest rates are usually lower compared to other types of loans as the gold is used as collateral. Some of the benefits of a gold loan with an EMI option are:

  1. Low-Interest rates: Since gold is kept as collateral, lenders offer lower interest rates compared to unsecured loans. This makes it an affordable option for those who require immediate cash.
  2. Quick disbursal: Gold loans are the quickest way to get cash as the process is straightforward, and loan disbursal is done within hours once the gold is assessed.
  3. No credit checks: Since this type of loan is secured against your gold, lenders do not check your credit score. Hence, even those with a poor credit score can avail themselves of this facility.

Gold Loan with an overdraft facility

Gold loan with an overdraft facility is also a type of loan in which you can borrow against your gold. The difference is that you can use the loan amount according to your needs, like a credit card. The interest is charged only on the amount that you use, which makes it a flexible repayment option. Some of the benefits of a gold loan with an overdraft facility are:

  1. Flexibility: An overdraft facility allows you to use only the amount you require, which makes it a suitable option for those who expect to need multiple small loans over time.
  2. Interest charges: When compared to a regular loan, which charges interest for the entire loan amount, an overdraft facility only charges interest on the amount that you use. This makes it a cost-effective option in the long run.
  3. Quick disbursal: Similar to gold loans with the EMI option, overdraft facilities also allow quick disbursal of funds. Hence, it can come in handy for those in need of immediate cash.

Gold Loan Vs EMI option and overdraft facility

Both gold loan with EMI option and overdraft facility has their advantages and disadvantages. Depending on your needs, you can choose the one that is best suited for you. Here is a comparison:

  1. Interest rates: Gold loans with an EMI option usually have lower interest rates than overdraft facilities.
  2. Payment option: In a gold loan with an EMI option, you have to pay a fixed amount every month until the loan tenure is complete. But in an overdraft facility, you have the option to choose how much to pay every month.
  3. Flexibility: When it comes to flexibility, the overdraft facility wins as it gives you the freedom to use the loan amount according to your needs.
  4. Loan tenure: In both options, the loan tenure is flexible, and it depends on the lender.

Both gold loan with an EMI option and overdraft facility are good options for those who need immediate cash. The choice between the two depends on the individual's requirements and their ability to repay the loan amount. Gold loans are an excellent option for those with a low credit score or those who do not want to go through the lengthy process of applying for an unsecured loan. However, before borrowing any loan, it is essential to read the terms and conditions carefully. Be sure to select a credible lender and take your time before deciding which option to choose.

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Frequently asked questions

Who decides the making charges on gold?

The making charges on gold are usually decided by the jeweller or the goldsmith who is making the jewellery. The charges may vary from one jeweller to another, and it is always a good idea to compare the prices before making a purchase.

Do we need to pay EMI for gold loan?

Yes, gold loan can be taken on an EMI basis. The terms and conditions may vary from one lender to another, and it is important to read the documents before availing the loan.

What is the difference between EMI and overdraft?

EMI or Equated Monthly Installment is a fixed monthly payment that includes both principal and interest components. It is usually taken for a specific period and cannot be changed. Overdraft, on the other hand, is a flexible credit facility that allows a borrower to withdraw money up to a certain limit. The interest is only charged on the amount withdrawn, and the borrower can repay the amount as and when they want.

What is the overdraft facility against gold?

Overdraft facility against gold is a credit facility that allows a borrower to withdraw money up to a certain limit against the value of their gold. The interest is charged only on the amount withdrawn, and the borrower can repay the amount as and when they want. The limit is usually determined based on the value of the gold and the creditworthiness of the borrower. This facility is ideal for those who need immediate cash without having to sell their gold.

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