What is the procedure for gold loan repayment?

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The ease of availability and simple eligibility requirements have made gold loans popular funding options. Households can today easily utilise the underlying value of this idle asset to raise funding at short notice. Gold loan repayment is simple too, doable through easy EMI payments and other available options provided by the lender.

Gain a comprehensive perspective on gold loan through a better understanding of how repayment happens and the available options to go for.

What is gold loan repayment?

Gold loan repayment can be simply explained as a process that involves paying the principal financing value availed back to the lending institution along with total interest accrued. Given that gold loans are secured advances, financial institutions allow borrowers to choose from a range of repayment options as per their convenience and gain back the possession of the pledged gold.

Process for gold loan repayment

Commonly, repayment of any loan involves EMIs, with each EMI comprising the principal and interest components payable towards the total loan liability. In the case of loan against gold, borrowers can choose from multiple repayment options as per their suitability and financial standing. The different gold loan repayment procedures adjust the monthly liability, thus enabling easy repayment of the advance.

Options for gold loan repayment you can choose from include the following:

    1. Repayment through interest-only EMIs

Borrowers can opt for the interest-only gold loan repayment procedure to meet their loan liabilities in time. It allows payment of the accruing interest through instalments, leaving the borrower with only loan principal as the liability to be met right at the end of the tenor.

    2. Partial principal repayment with flexible interest payment

The customer-centric repayment option allows borrowers to repay the principal amount in parts throughout the tenor and make interest payment according to a flexible repayment schedule. It provides repayment relaxation from the monthly need of meeting a fixed liability throughout the loan tenor. Irrespective of the gold loan interest rate, a significant part of principal repayment during the initial stages of the tenor means reduced overall interest liability for the borrower.

    3. Bullet repayments

Some financial institutions allow gold loan borrowers to opt for the bullet repayment option to meet loan liability in time. Under this arrangement, a borrower needs to repay the total loan liability, including the loan principal and interest, at the end of the tenor instead of meeting any repayment liability periodically.

It allows borrowers to manage their finances better by leaving all the income free from any monthly charge. You can thus complete your bullet repayment at a go and regain possession of the pledged gold through a formal release.

    4. Monthly repayments in EMIs

It is the most common form of gold loan repayment that allows a borrower to meet the loan liability in parts through a scheduled monthly repayment in EMIs. Each EMI comprises principal and interest components amortized for complete repayment by the tenor’s end.

Keep all documents required for a gold loan handy and apply with a high income to secure a minimum interest rate for improved affordability. Reduced interest accrual should bring down the overall loan liability, making repayments convenient for borrowers.

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