Gold loans with overdraft facility work like a credit card
NEW DELHI: Gold overdraft loans are typical “use as you need” credit facilities. When you pledge gold, the lender puts money in your bank account. But will only charge interest on the part you withdraw, not the full amount.
“They are a form of revolving credit that you can use for gold and work more or less like a credit card. Interest rates and the amount of margin on overdraft loans are comparable to those on loans. in gold. However, they offer much more flexibility than a gold loan. in which a borrower pays an equivalent monthly payment (EMI), ”said Adhil Shetty, CEO of Bankbazaar.com
When you deposit your gold with a lender as security for an overdraft, the lender opens a specific overdraft account. The account is credited with the loan. Depending on the lender, the overdraft account can be a new account or the bank can link it to your existing savings account.
“Some lenders may offer all of the features and benefits associated with a checking account over the overdrawn account. You can withdraw amounts from the overdrawn account when needed. The lender could even issue a debit card for the overdrawn account.” , said Shetty.
He added that the other way to access the loan amount is to use a check issued for the overdrawn account. Some lenders may also allow you to shop online or make a payment through an overdrawn account.
“The IME-based gold loan gives you a lump sum. The short loan, however, takes a different approach. On the one hand, it is reusable. For example, if a lender approves you for a loan of credit. “Gold overdrawn for a particular amount, you can access any part of the line of credit at any time,” Shettty said.
If you have, say, an overdraft of ₹3 lakh for three years. Of this, you can consume some of it, say, ₹50,000 or the total amount at any time in part or in whole during the term of office. The lender will only charge you interest on the portion of the money that you used.
Short loans are a good idea when you are worried about future expenses and want to prepare for a sudden need for funds.
They are useful when you need to borrow small amounts, but want to keep options close at hand if there is a greater financial need than expected. A gold loan with an EMI option, on the other hand, is best suited for making planned spending.
(Do you have personal finance questions? Send them to [email protected] and get answers from industry experts)
Never miss a story! Stay connected and informed with Mint. Download our app now !!