Gold ornaments are more than just jewelry. They are a type of backup that can help you out of difficult financial situations. You can borrow money against your gold jewelry in one of the quickest and simplest ways possible. Gold Loan is a loan obtained by pledging your gold jewelry to a lender.

In the market, there are various loans that are similar to gold loans. These loans serve the same function of quickly giving the borrower the cash they need. They are credit card loans and personal loans. The benefits and drawbacks of gold, personal, and credit card loans vary. However, one area where gold loans excel over them is that they are always secured loans, meaning that they are taken out in exchange for collateral, in this case, gold ornaments.

It is simple to repay gold loans precisely for this reason, as the collateral enables the lenders to offer you a lower gold loan interest rates than those of personal loans and credit card loans. Applications for gold loans are processed similarly quickly and with little paperwork. Lenders, including banks and non-banking financial companies, have developed 4 types of gold loans by altering the method they are repaid because gold loans are simpler to handle and grant. Here are some details about them: 

Ways to repay a gold loan

Pay the interest as EMI & Principal later

By choosing this option, you can pay back the interest according to the gold loan’s EMI schedule, but you must pay back the entire amount borrowed when the loan ends. Most borrowers find that this type of arrangement works well because they just have to worry about paying interest during the loan’s term and not about repaying the principal.

Make partial payments

You are not forced to follow the lender’s EMI scheme if you choose this method of gold loan repayment. The main amount, as well as the interest, can both be paid in installments as needed. As a result, you can adjust your payback schedule to fit your budget. Your total interest payment, which is based on the amount of the loan that is still outstanding and is calculated daily, will be lower if you decide to pay the principal in full at the beginning. You thus spend far less on serviceable interest.

Bullet repayment

A bullet repayment plan requires you to pay out the entire loan balance at the end of the loan’s tenure, including the principal and interest. Throughout the loan term, you don’t have to worry about paying back the gold loan at all. You can pay the full amount when the loan period is over without having to follow any EMI schedule. The loan’s interest is calculated monthly but is only due after the gold loan period is up. This method of gold loan repayment is known as a bullet repayment plan since you pay off the debt in one lump sum.

Regular EMI option

The regular EMI Gold loan is designed for people who receive monthly deposits of money into their bank accounts and is targeted at the salaried class. Interest and principal payments are both included in the EMI amount in this case. Since this loan is being given to candidates who are salaried, the process of granting it is also quick.

In general, Gold Loans feature short repayment tenures and no lock-in periods. A gold loan can last for a maximum of five years. The loan account will be closed when your tenure is through and you have deposited the remaining loan balance and interest due. The lender will give back the gold items given as collateral if the loan is satisfactorily repaid.