Introduction
Pledging gold isn’t just a financial decision – it’s often an emotional one. For many of us, gold isn’t just a precious metal; it’s a symbol of tradition, family, and cherished memories. During an urgent financial need, getting a Gold Loan may be quick and reliable support. But the pledged gold may hold deep personal and cultural significance. That’s why repaying the Gold Loan isn’t just about clearing debt. It’s about bringing valuable gold back home. And to do that with ease and confidence, a well-thought repayment strategy is essential. In this blog, we will walk you through Gold Loan repayment strategies to help manage your repayment. Read on!
How Does Gold Loan Repayment Work
As Gold Loan is a secured loan and you pledge your gold as security with the lender. At the time of loan application, the lender evaluates the value of your gold and offers you the loan amount based on the gold’s current market value, also known as loan-to-value.
Let’s understand how it is calculated with the help of an example:
If the current market value of 100 grams of gold is ₹1,00,000 and the lender offers you loan-to-value (LTV) of 75%. The maximum amount you can get is ₹75,000 (75% of ₹1,00,000).
Every time you make an EMI repayment; the outstanding loan amount reduces. Once you have repaid the loan amount successfully, the lender will return your pledged gold in the same condition as you pledged.
Also Read: How is Gold Loan Amount Calculated
Gold Loan Repayment Options
With Gold Loan, you have the flexibility to select a repayment option that suits you. Bullet repayment, EMIs, Interest-only EMIs, partial repayment, and overdraft are some of the options. Let’s have a look at these:
1. Bullet Repayment
The bullet repayment allows you to repay the entire loan amount, both principal and interest at the end of the loan tenure. This may be an ideal for those planning to make an entire repayment at once.
2. Regular EMIs (Equated Monthly Installments)
In this type of repayment option, you pay a fixed amount every month that includes both principal and interest. This method suits individuals with a stable income who prefer structured and predictable repayments.
3. Interest-Only EMIs
Here you pay only the interest each month and repay the full principal at the end of the loan tenure. This option can help you reduce monthly outflows and provides time to arrange the full repayment amount later.
Also Read: How to Calculate Gold Loan Interest Rates
4. Partial Repayment (Flexible Payment)
This repayment option allows you to repay any amount at any time during the loan tenure. This option is useful for those with irregular incomes and helps save on interest by repaying early.
5. Overdraft Facility
In the overdraft facility, you are given a credit line against your gold and charged interest only on the amount used. This flexible option is particularly beneficial for business owners or individuals who need funds on a rolling basis.
Why is it Important to Choose an Ideal Repayment Option
When it comes to repaying your gold loan, there’s no
one-size-fits-all solution. That’s why it is important for you to
choose a repayment option that matches your financial comfort and
lifestyle. If you pick the right plan, whether it is bullet repayment,
EMIs, or interest-only payments, it will be easier to stay on track
without feeling overwhelmed. It helps you avoid missed payments, keeps
your credit score in good shape, and saves you unnecessary stress.
Most importantly, the right repayment option gives you peace of mind
that your gold is safe and will be returned at the end of the loan
tenure. So, take a moment to understand what works best for you. It’s
a small step that makes a big difference in your overall experience.
How to Select the Best Repayment Option
The best repayment option depends on the following:
- Loan tenure
Understanding your loan tenure helps you determine the most efficient repayment plan. For shorter tenures, a bullet repayment is convenient as in this repayment option you make the loan repayment at once at the end of tenure. However, if you choose longer tenures, choosing EMIs or flexible partial payments can help you avoid a large lump-sum burden and manage your cash flow better over time.
- Income Stability
One of the most important factors that will help you select your repayment option is your monthly income. If you have a steady monthly income, opting for EMIs ensures that you have a structured and stress-free repayment schedule.
- Interest Rate
Choosing a repayment option that minimise your overall interest burden is important. By comparing interest structures of repayment options, you can pick the option that provides the best value for money over your loan term.
- Financial Discipline
Your ability to stick to a financial plan can help you choose the best option. If you’re disciplined and consistent, structured EMIs ensure you stay on track and clear your loan smoothly. If you prefer flexibility, partial payments or an overdraft facility may suit you better. However, these options require you to stay proactive to avoid excess interest.
Also Read: Benefits of Taking Gold Loan
To Conclude
Repaying a Gold Loan isn’t just about closing a financial obligation but also about safeguarding something that holds an emotional value. That’s why it is important to stay mindful of how you manage your repayment. Repayment options, such as bullet repayment, regular EMIs, interest-only EMIs, partial payment or overdraft facility give you the freedom to select the repayment tenure that suits you the best. However, it is important for you to know the factors, such as loan tenure, income stability, interest rate and financial discipline which can help you make informed decisions and make your repayment easy and manageable.
Now that you have understood how you can choose an ideal repayment option, choosing a trusted financial institution is also important. This is where Poonawalla Fincorp comes in. With Poonawalla Fincorp’s Gold Loan, get the true value of your gold with easy repayment options. So, what are your waiting for? Apply now!
Frequently Asked Questions
1. What if I miss paying my EMI on time?
If you miss your EMI repayment date, it can result in monthly default interest and negatively impact on your credit score. It’s always advised to avoid missing EMI dates.
2. What are the eligibility criteria for getting a Gold Loan?
Gold Loan eligibility criteria may vary from lender to lender. Here are some common eligibility criteria that you must fulfil:
- Age: Between 21 and 65 years.
- Citizenship: Indian.
- Gold Purity: 18 to 22 Karat.
3. How much loan amount can I get if I pledge 100 grams of gold?
You can receive 75% of the amount of the gold you have pledged based on the current market value of gold.
4. Can I select repayment tenure?
Yes, Poonawalla Fincorp allows you to select a flexible repayment tenure up to 12 months.
5. What are the documents I need to submit?
To avail of a Gold Loan you must submit your KYC documents, which includes a copy of your PAN card, Aadhaar card, driving license, voter ID, and passport