Even after having a low credit score, a good amount of gold can help you come out of your financial crisis. Like personal loans, none of the lending institutions has defined the purpose for which the gold loan should be used. Whether an individual has to plan a destination wedding, pay tuition fees, or make urgent medical payments, etc. a gold loan is a sure shot solution to all.
Since it is a secured loan, the interest rates are comparatively lower than that of personal loans. In addition to this, HDFC Gold Loan providing quick disbursal, minimum documentation, and lenient eligibility criteria make the gold loan more popular among customers. Gold loan is really flexible with its tenure and repayment policy. Tenure of a gold loan ranges from 3 months to 5 years as it is a short term loan. The repayment policy also has options according to which you can opt for the one you are comfortable with.
Now talking about repayment options lets see which one is better - EMIs or overdraft.
A gold loan with an EMI facility:
A gold loan with an EMI option is a simple procedure where you pledge your gold and submit the required documents. Then on the basis of the rules of the lending institution, you get a fixed loan amount for a fixed tenure with regular repayments in the form of EMIs. Both NBFCs and Banks offer this facility. Banks usually give 80% of the loan amount from the gold you have pledged whereas NBFCs provide you with just 60% of the amount.
A gold loan with overdraft (OD) facility:
A gold loan with an overdraft facility works the same as the credit card. You can spend as much as you need and anywhere but within the credit card limit. The amount of your gold pledged is transferred to your current savings account or made a new overdraft account with similar features. The gold loan interest rate will only be applicable on the amount you use. Some banks allow you to withdraw the amount from your debit card from the ATM of any bank. In the case of an overdraft facility, the interest rates are comparatively higher than the usual. Unlike the EMI option, the payment in the overdraft facility is in a lump sum and can be closed anytime.
The gold loan with an EMI facility suits best for the planned expenses.
On the other hand, the overdraft facility is best suited for smaller emergency expenses and usual business expenses.
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