Gold loans with overdraft facility work similar to a bank card

NEW DELHI: Gold loans with overdraft are typical “use-as-you-need” credit score amenities. When you pledge gold, the lender will put cash in your checking account. But will solely cost curiosity on the portion that you simply withdraw, not your complete quantity.

“They are a form of revolving credit that you can avail against gold and function more or less like a credit card. The interest rates and margin amount on overdraft loans are comparable with gold loans. However, they offer much more flexibility than a gold loan in which a borrower pays equated monthly instalment (EMI),” stated Adhil Shetty, CEO, Bankbazaar.com

When you deposit your gold with a lender as collateral for an overdraft, the lender opens a particular overdraft account. The account is credited with the mortgage. Depending on the lender, the overdraft account may very well be a brand new account, or the financial institution can hyperlink it to your present financial savings checking account.

“Some lenders may offer all the features and benefits associated with a current account to the overdraft account. You can withdraw amounts from the overdraft account as and when required. The lender could even issue a debit card for the overdraft account,” stated Shetty.

He added the opposite technique to entry the mortgage quantity is utilizing a cheque issued for the overdraft account. Some lenders might also will let you store on-line or make fee by way of an overdraft account.

“The EMI-based gold loan offers you a lump sum. Overdraft loan, however, takes a different approach. For one, it is reusable. For instance, if a lender approves you for an overdraft gold loan for a particular amount, you can access any portion of the credit line at any time,” stated Shettty.

If you will have, say, an overdraft of ₹3 lakh for 3 years. Of this, you’ll be able to eat part of it, say, ₹50,000 or your complete quantity any time partly or entire by way of for the tenure. The lender will cost you curiosity solely on the portion of cash you will have used.

Overdraft loans are a good suggestion if you end up apprehensive about future bills and want to put together your self towards and sudden want for funds.

They are useful when you could borrow small quantities however want to maintain the choices at hand if there is a larger than anticipated want for funds. A gold mortgage with an EMI possibility, alternatively, is greatest suited to making deliberate bills.

(Do you will have private finance queries? Send them to mintmoney@livemint.com and get them answered by trade specialists)

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