Gold Loan with EMI or Overdraft: Which One to Choose?

Sep 11, 2020

Life is filled with many uncertainties that make it difficult to predict its course. Sometimes, despite your best plans, you may be unprepared for an emergency. A large medical expense or an unexpected accident to uninsured property can drain your finances. In such times, borrowing funds can come to your rescue.

However, if you already have multiple loans and need more to service your existing ones or for new emergencies, a gold loan can come to your rescue. A loan against gold is processed faster, does not require a credit score or income proof, and can be availed at low-interest rates.

While choosing to take a gold loan, there are two viable options you can consider: a gold loan with EMI option or a gold loan with overdraft facility.

Understanding the Terms

A gold loan with EMI option is a credit facility that offers EMI as a mode of repayment. The loan against gold is sanctioned as a lump sum against your assets, for a fixed period at a predefined interest rate. The repayment of the gold loan is done in fixed installments.

A gold loan with an overdraft facility can be compared to a credit card. Similar to credit card spending, this credit option allows you to access money whenever you want, up to an upper limit. This limit is determined by the gold assets that you pledge.

How Does Each Option Work?

A gold loan with an EMI option functions like any other secured loan. Once you submit your assets as collateral and complete the necessary paperwork at the financial institution, the loan amount will be sanctioned, to be deposited in your bank account. You can then use these funds as per your requirements.

Choosing an EMI option on gold loans has many benefits:

·        Lower Repayment Pressure: EMIs give you the flexibility to repay the borrowed amount, thus reducing financial stress.

·        Helps with Planning: EMI payments are known in advance, given the loan amount, interest rate, and duration are fixed. Given that you, as a borrower, know the exact amount of fixed installment payments in advance, it makes it easier to plan repayment from your income.

·        Flexible plans: Often, financial institutions give you the freedom to choose your EMI amount by adjusting the duration of the loan or the number of assets pledged.

A gold loan with an overdraft facility functions similar to a bank account. When you apply for this loan, the lender will give you an overdraft account that you can access with a debit card, cheque book, or demand draft facility. Some institutions link it to your existing bank account. You are free to use as much of the money you require, up to the amount deposited.

The overdraft facility on gold loan has benefits that are different from other options:

·        Flexibility: Gold loans with overdraft facilities are “use as you need” credit facilities. For borrowers with dynamic credit needs, who are uncertain about the amount of loan they may require, this provides the flexibility to use funds up to an upper limit.

·        Lower Interest Rate: Interest on a gold overdraft facility is charged only for the loan amount utilized. Therefore, if you use an amount lower than the total sanctioned amount, then it can turn out cheaper than a lumpsum loan.

·        Convenience: An overdraft facility gives you all the benefits of a bank account. Since it gives you multiple ways to access the borrowed funds, it is highly convenient for borrowers.

·        Pre-closure: The overdraft facility can be closed with a lumpsum payment at any time.

Which Option is Better?

While both gold loan options have their benefits, overdraft gold loan facilities often prove to be highly beneficial. A gold loan with an overdraft facility gives you 24/7 access to credit, charges interest only on the amount used while giving you the option to withdraw more if needed, and also gives you the convenience of using bank cards.

Conversely, with an EMI option on a gold loan, the amount is fixed, interest will be charged on the entire amount even if you do not use it, and since it will be deposited in your savings account, it can be difficult to make the distinction between your own and borrowed funds.

Rupeek Quick

Rupeek understands your borrowing needs and preferences. This is why Rupeek Quick is a fast and simple gold loan overdraft facility. Rupeek offers flexible credit lines at the attractively low-interest rates that are easy to apply for and use. After assets are submitted, loan disbursal is instant. Rupeek Quick is an ideal loan facility for healthcare emergencies, quick cash needs for small businesses, and even vacations. With Rupeek Quick, you can get instant cash with a single click, anytime, anywhere.