Which is Better – Gold Loan with an EMI Option or Overdraft Facility

  • A good amount of gold can help you get out of your financial predicament, even if you have a low credit rating. If you need to finance a purchase of a house, or even a new car, gold loans are a quick and secure solution. The end-use for gold loans is not defined like personal loans by the credit institutions.
  • Gold loans are secured loans, so interest rates are lower than personal loans. There are also a number of other features such as lenient eligibility criteria, minimal documentation, and quick loan disbursal that make gold loans very popular with customers. Gold loans come with various options to meet your financial requirements
    • Gold loan with an EMI option  
    • Gold loan with an overdraft facility

If you plan to apply for a gold loan in the near future, you will need to understand the differences between the two gold loan schemes so that you can choose the gold loan option that suits you best.

What Is The Difference between Gold Loan with Overdraft Facility and EMI Option?

To meet the different needs of different customers, different lenders offer gold loan with overdraft facility and EMI option. Which one to choose depends on your financial requirements.

Gold Loan with an EMI Option

  • A gold loan with an EMI option is a walk-in credit facility; you simply visit the lender’s nearest branch, submit the necessary documents, pledge your gold article, and you’re done. Based on the bank’s rules, you will receive a fixed loan amount for a fixed term with EMI repayments.
  • Gold loans are offered by all major banks and NBFCs. 
  • Banks typically offer at least 80% of the value of your gold in the loan, and non-banking banks (NBFCs) offer this facility at a much lower value of 60-70%.
  • As for the interest rate on a gold loan, it is usually between 10-45% and 24%, and this is also the amount you can expect from your lender in the form of fees. Most bank – sanction gold loans give a loan up to ₹ 75 lakhs to ₹ 1 crore. 

Gold Loan with an Overdraft Facility

In this, your gold loan amount is the overdraft facility. It is working similar to a credit card spending. You can spend as much as you need anytime anywhere but up to the allowed credit limit. The gold loan interest rate will be applicable only on the amount you use.

When you deposit your gold as collateral to your lender, they open an overdraft account in which the loan amount for the value of gold pledged will be credited. Some banks allow you to withdraw the gold loan amount using your debit card from an ATM of any bank. And some link it to your savings bank account or open a new overdraft account. Some lending institutions even open a new account with the benefits and features similar to a current account. Other ways to access the loan amount is using a cheque which is issued separately for the overdraft account. In case of the overdraft facility, the interest rates are comparatively higher than the usual. Also unlike gold loan with EMI option, the payment option in overdraft facility is in a lump sum and can be closed anytime.

The overdraft facility is like a credit card, but it works much like a credit card payment, much like a debit card.

The interest rate on the Gold Loan is only for the amount you use and you can spend as much as you need within the allowed credit limit. After you have deposited your gold as collateral with your lender, the lender opens an overdraft account in which the loan amount is credited to the pledged gold value. The bank allows you to withdraw gold funds from a bank ATM, such as a debit card, or from your bank’s ATM.

The other way to access the funds is to draw a cheque for the overdraft account separately, and the advantage of this feature is similar to a checking account. The bank even offers a rate that is comparatively higher than usual for an overdraft. You can also open a new overdRAFT account with a linked passbook on your credit or debit card or with your ATM.

The payment option for the overdraft is also a lump sum, like the gold loan option EMI, and you can close it at the end of the credit term.


  • An overdraft facility allows you to pay interest only on the loan amount you use. The interest calculated for gold loan comes with an EMI option. 
  • Gold loans with EMI options are best suited for planned spending. You can also plan your loan repayments in the form of EMI from income, and gold loan with overdraft are best suited for short-term emergency expenses.
  • Choosing either of the option depends on your requirement and convenience.