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Gold Loan Overdraft Facility: Meaning & Benefits

Gold loan overdraft or overdraft against gold is a credit facility offered to gold owners against the collateralised asset. Check all the benefits of Gold Loan Overdraft facility.

12 Dec,2022 11:05 IST 1930
Gold Loan Overdraft Facility: Meaning & Benefits

Gold is one of the most valuable assets in Indian households. However, they prefer to keep these articles and jewellery safely locked in bank lockers after using them for particular occasions. In financial emergencies and liquidity crunch, people tend to sell gold articles. Here, they can pledge the gold as collateral to attain a credit limit through a gold loan overdraft.

What Is A Gold Loan Overdraft Facility?

Gold loan overdraft or overdraft against gold is a credit facility offered to gold owners against the collateralised asset to avail of credit with a limit to use when they need funds to cover expenses. A credit limit is similar to credit cards, where the lender sets a monetary limit, and the borrower can take out money until they reach the credit limit.

A gold loan overdraft works similarly to a bank overdraft facility where the lenders ask to pledge the gold articles as collateral. Then, the lender creates a credit line for the borrowers based on the current market value of the gold committed.

Once you avail of the gold loan overdraft facility, you can withdraw as much as you require within the set overdraft limit. Unlike other loan products, where you get the loan amount in your bank account at once, you have no obligation to utilize all the funds available in the credit limit.

You can use as much as you require and pay interest only on the utilised amount. The gold loan overdraft has a predefined repayment tenure, and you are legally bound to repay the principal amount and interest to the lender within the repayment tenure.

Benefits Of Overdraft Against Gold

Although traditional gold loans are ideal credit products, lenders levy interest on the whole amount offered to the borrower. Gold loan overdrafts allow asset owners to have a credit limit but not the obligation to pay interest on the entire amount. Furthermore, borrowers choose the gold loan overdraft facility for the following features and benefits.

• Immediate Credit

Like traditional gold loans, where lenders approve the loan application within hours, they get an overdraft against gold immediately. Such immediate capital can allow small business owners to cover their current short-term liabilities without default.

• Interest Rate

One of the best benefits of a gold loan overdraft facility is the interest rate that limits how much interest you pay to the lender. In a gold loan overdraft, you only have to pay interest on the amount you have utilised for the offered credit limit. For example, if you have used Rs 10,000 from a Rs 1,00,000 gold loan overdraft, the lender will ask you to pay interest only on Rs 10,000.
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• Gold Value

Like a traditional gold loan, lenders offer gold overdrafts and credit limits based on the current value of the gold in the domestic market. However, gold prices fluctuate based on numerous market factors, such as demand and supply. Based on the price fluctuation, the lender can reassess the gold value and increase the gold loan overdraft limit if the gold prices increase.

Gold Loans With An EMI Option vs Loan Overdraft Facility

Gold owners have two choices to leverage their gold: take a gold loan with an EMI option or avail of a gold loan overdraft. In a gold loan with an EMI option, the lender requires you to pledge the gold and receive a lump-sum payment in your bank account from the lender. Principal and interest repayment begins on the entire loan amount after disbursement.

However, an overdraft against gold provides a credit limit to borrowers where the money is not deposited into their bank accounts. They can withdraw from the overdraft against gold and pay interest on the utilised amount within a set tenure.

You can choose an EMI loan or an overdraft facility based on your needs and convenience. Overdrafts of gold loans, however, are advantageous since they charge interest only on the amount borrowed and allow borrowing up to the sanctioned limit. If you have planned expenses and know the amount you want, you can prefer gold loans with EMIs.

Avail Of An Ideal Gold Loan With IIFL Finance

With IIFL Gold loan, you get industry-best benefits through our process designed to offer instant funds based on the value of your gold. IIFL Finance Gold Loans come with the lowest fee and charges, making it the most affordable loan scheme available. With a transparent fee structure, there are no hidden costs you have to incur after applying for the loan with IIFL Finance.


Q.1: Are gold loans better than an overdraft against gold?
Ans: Both credit products have their advantages. If you have planned expenses and know the approximate amount you want to raise, you can avail of a gold loan. However, if you do not know the approx amount and don’t want to pay interest on the entire loan amount, you can avail of a gold overdraft.

Q.2: What are the interest rates on IIFL Finance Gold Loans?
Ans: The interest rates on IIFL Finance gold loans depends on the rate fixed by financial institutions.

Q.2: How can I apply for a Gold Loan with IIFL Finance?
Ans: Getting a gold loan from IIFL Finance is super easy! Click on the ‘Apply Now’ button mentioned above and fill in all the required details to get a loan approved in few minutes.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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