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Which Is Better? – Gold Loan With Overdraft or EMI

  • The World Gold Council’s latest report disclosed that demand for gold (not including OTC markets) for 2021 has increased over last year’s levels to reach 4,021t, making up for losses from COVID.

    In 2021, gold bar and coin demand rose to the highest point in eight years.
    For many people, gold is an element of security and luxury. It symbolises empowerment, representing what they have accomplished in life.

    However, sometimes people need a little extra cash to cover the cost of unexpected emergencies or weddings, education, house repair, etc.

    A gold loan bridges the gap between these financial needs.

    A gold loan can be taken in two forms: an EMI or an overdraft facility.

    Difference between a gold loan with overdraft and EMI

    Even though a gold loan with overdraft and EMI, both will serve an individual’s financial purpose, they have a lot of differences. These points of difference will let the borrower decide which option suits his needs best.

    • Meaning: 

    A gold loan is a secured loan that is taken from a financial institution to borrow money in exchange for the borrower’s gold as collateral.

    When borrowers take a gold loan on EMI, they are ideally taking money in a lump sum, and they will have to pay the monthly interest and principal (EMI) to the lender until the loan amount is repaid. It functions similar to a traditional loan.

    Conversely, a gold loan with overdraft functions similar to a credit card.

    Credit cards allow individuals to spend up to their credit limit set by issuing companies. Similarly, a gold loan with an overdraft enables individuals to spend up to the limit set by their gold assets.

    With Muthoot FinCorp, getting a gold loan is hassle-free as the eligibility criteria are easy to meet, with minimal documentation and instant loan approval.

    • Flexibility: 

    A gold loan with an overdraft is a type of credit that lets borrowers use as much money as they need up to an upper limit. This flexibility is very useful for people with fluctuating credit needs who are uncertain about the amount of loan they may need.

    In contrast, this flexibility is not there in a gold loan on EMI as the person receives the loan amount in one go; they can either spend the entire amount at once or in intervals.

    • Interest rates: 

    In a gold loan with an overdraft, interest is levied on the amount utilised. For instance, if individuals borrow Rs. 50,000 but only draw Rs. 30,000, then they will be charged on Rs. 30,000 and can save money in the long run.

    So, if the customer takes less than the total sanctioned amount, they may pay less interest than they would on a lump sum loan.

    However, the interest rates on gold loans with an overdraft facility might be higher than on EMIs.

    With Muthoot FinCorp, individuals can get a gold loan at attractive interest rates starting from 11.99% p.a.

    • Repayment: 

    EMI is the best way to repay a loan. With monthly EMI payment options, individuals can select the repayment period and make instalments at their convenience. This reduces financial stress by making repayment convenient.

    Further, EMIs are a great way to keep track of all payments.

    In a gold loan with an overdraft facility, individuals are not sure about how much credit they will use in a month, thus the interest that will be charged and the repayment tenure is also unknown, unlike an EMI option.

    With Muthoot FinCorp gold loans, individuals can get flexible repayment tenures that suit their needs.

    • Pre-closure: 

    Individuals can close their loan anytime by repaying the amount in a lump sum in a gold loan with an overdraft facility.

    In a gold loan on EMI, if individuals repay the loan amount before a given period, they might have to pay pre-payment charges.

    With Muthoot FinCorp, individuals can repay their gold loan amount after three months without incurring any foreclosure charges.


    Figuring out whether to go for a gold loan with overdraft or an EMI option can be difficult.

    A gold loan with an overdraft feature is a good option when individuals are unsure how much loan amount they require. This facility helps them access money whenever they need it. It only charges interest on the utilised loan amount but the interest rate applicable is higher.

    If individuals choose an EMI option for a gold loan, they will be paying interest on the entire amount of money they borrowed, even if they are not using it all at once.

    The gold loan EMI option is best suited for planned expenses that require the full sum of money to be used quickly or spent in full.

    Thus, which option to choose will depend upon the requirements of the individual.

    Harshit Agrawal 14-Apr-2022 1809 Views

About Author

Harshit Agrawal -
Harshit Agrawal heads digital marketing for Muthoot Pappachan Group from its head quarter based in Kochi, India. He has managed digital marketing & activations for brands such as Maruti Suzuki, Hero MotoCorp, Bharti Airtel, Google, Mankind Pharma...read more

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