Home >Money >Personal Finance >Gold loan repayment: No need to pay in EMIs, four different ways detailed here
Unlike most other loans, you need not necessarily pay back in monthly installments, loan against the yellow metal offers several repayment methods to suit your pocket. (Photo:iStock)
Unlike most other loans, you need not necessarily pay back in monthly installments, loan against the yellow metal offers several repayment methods to suit your pocket. (Photo:iStock)

Gold loan repayment: No need to pay in EMIs, four different ways detailed here

RBI's new guidelines, issued in August allowed lenders to lend 90% of the gold value as against 75% of the value, effective till March next year.

Gold-backed loans became increasingly popular in the last few months, amid the coronavirus outbreak. To provide some respite to the people deal with the financial crisis caused by the coronavirus, RBI eased the gold loan guidelines earlier this year in August where lenders could give more loan against jewelry till March next year. The new guidelines allowed lenders to lend 90% of the gold value as against 75% of the value. Lenders saw their gold loan books soar during the pandemic. If you have also taken a gold loan, you can opt for any of the following methods as your lender allows to repay your loan and take your gold back. Unlike most other loans, you need not necessarily pay back in monthly EMIs, loan against the yellow metal offers several repayment methods to suit your pocket.

1) Pay off the interest in EMIs and repay the principal amount when loan matures

This option allows a borrower to pay off only the interest component of the loan in monthly instalments, as per the EMI schedule designed by the lender. The principal amount can be paid as a lump sum when the loan tenure ends.

2) Make partial payments of the principal amount and interest component flexibly

Another way you can opt for is to make partial payments of the principal amount and interest thereon. Under this method of payment, you do not need to conform to a fixed monthly instalment schedule. "A great way to reduce the outstanding loan amount is to repay your principal amount initially and then pay the total interest. This is because the interest pay-out is typically calculated daily. But opting to pay your principal amount first, you can save a lot of money on serviceable interest," says HDFC Bank.

3) Basic bullet repayment scheme

The gold loan online payment option can also be leveraged by opting for the bullet repayment scheme. Under this method, you can repay the entire loan amount, i.e. the principal amount and the interest charged on it in a single lump sum, at the end of the loan tenure. As such, there is no need to pay monthly instalments at all. Simply repay your loan and get your gold back from the bank, in one shot. Note that the bullet repayment scheme is generally applicable only on short-term loans, typically those that you can repay within six months to an year's time.

4) EMIs comprising of the principal amount and interest rate

Under this method you can pay a part of the principal amount and the interest component in equated monthly instalments. This repayment scheme is typically created for salaried borrowers, i.e. people receiving an inflow of cash into their bank accounts every month.

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