The gold overdraft loan offers greater flexibility than a normal gold loan and reduces the interest liability


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New Delhi: A gold loan is a quick and secure solution for any type of financial emergency. You do not need a good credit rating or proof of income to avail this loan. Also, because gold loans are a secured loan, the interest rates are lower than the personal loan interest rates. Second, there is no limit on the end use of the loan amount.

Before opting for this loan, however, you should know the difference between a regular gold loan and a gold overdraft, which offers greater flexibility and reduces your interest burden.

A gold overdraft is like a use-as-you-need loan. The lender sanctions a fixed loan amount based on the gold you pledged. The lender will transfer the money to your bank account, but will only charge you interest on the amount you withdrew, not the entire loan amount.

“When you deposit your gold with your lender as security for a gold overdraft, the bank, instead of transferring the approved loan amount to your account, opens a specific overdraft account. The loan amount equal to the value of the pledged gold is credited to this account with the lender. You can withdraw amounts from the overdraft account if necessary. This makes it reusable, “said Adhil Shetty, CEO and co-founder of

It’s like some form of revolving credit facility that you can draw on gold that works like a credit card. Also the interest rate and the amount of the margin are almost the same as with a normal gold loan, but it offers more flexibility than a normal gold loan.

Here are some of the differentiators of gold overdrafts

  • The end use of the loan amount is not restricted, money can also be withdrawn around the clock on public holidays with an ATM card
  • A separate account for overdrafts will be opened, on which you will receive an ATM card, mobile banking and net banking
  • You can exchange the gold jewelry during the loan period, which is not possible with a normal gold loan
  • Interest is only charged on the amount used.
  • The repayment can be made either as a lump sum or in the form of endless payments

If you already have a savings account with the bank, the bank can link the overdraft account to the savings account. Some lenders also offer all of the features and benefits associated with a checking account, the overdraft account. If necessary, you can withdraw amounts from the overdraft account. The lender could even issue a debit card for the overdraft account.

“Overdrafts are a good idea when you are concerned about future expenses and want to prepare for a sudden need for cash. It is especially helpful when you need to borrow small amounts but want to keep the options ready just in case you need more funding than expected, “said Adhil Shetty.

Many public and private lenders offer gold overdrafts. Praveen Kutty, Head of Retail Banking, DCB Bank Ltd., which also offers gold overdrafts, said, “DCB Bank offers an overdraft facility where the interest payable on the DCB gold loan is only charged on the amount of the loan drawn which reduces the debt tie-up As a prepayment option, this is a perfect tool for obtaining short to medium term loans for micro and small businesses. The overdraft facility is an attractive option for customers. ”

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