Gold Loan Overdraft vs Gold Loan EMIs

Gold loans have many other benefits as well in the form of minimal documentation, lenient eligibility criteria, and fast loan disbursal. Yet another interesting feature is that these loans come in various schemes to suit your requirements. In this article, we are going to discuss one of these forms: overdraft gold loan and compare it to the regular gold loan with EMI facility. If you are thinking of taking such a loan soon, you need to understand the difference between the two of these, so that you can pick the one that suits you best.
The Difference between Overdraft Gold Loan and EMI Facility Gold Loan

Different customers have different requirements, and to meet them, gold loans are of two types as well. Some of these types are gold loan overdraft, and gold loan EMI. It all depends on your financial requirements which ones you choose. To help you understand the difference, here’s what it's all about.
Gold loan with EMI option

In this option, you visit the nearest bank branch, give your gold as a pledge of good faith, submit the necessary documents, and get the funds. On the basis of the lender’s regulations, you will get a fixed loan amount, for fixed loan tenure, and have to give regular payments as EMIs.

Both banks and NBFCs provide this facility. Banks give at least 80% of the loan value while NBFCs give 60% of the loan value. There is an upper cap on the amount as well, that the lender can sanction. Gold loan interest rates are usually between 10.45% and 24%.
Gold loan with overdraft facility

In this option, the overdraft facility is the gold loan amount. It is very similar to credit card spending. This means that you can spend as much as you need, anytime and anywhere, but there is still a credit limit. The interest rate shall be applicable only for the amount you use, not the whole amount you are given.

When you deposit your gold with banks and other lenders, you are given an overdraft account in which the loan is credited. Some banks do allow the withdrawal of the money with a debit card from any ATM of any bank. Some banks link this account with your savings account, or just open a new overdraft account. There are some lending institutions that open new accounts with features and benefits like a current account. You can also withdraw with cheques. In this case of overdraft facility gold loans, the interest rate is higher.