Gold Loan Repayment Process: How it Works, Types of Repayment

Gold Loan Repayment Process - Learn the step-by-step procedure of repaying a gold loan in this article. Check out how to make gold loan repayment easy and hassle-free!

15 Feb,2024 09:59 IST 2483
Procedure for Gold Loan Repayment: How it Works, Types of Repayment

Gold loans are popular funding options because they are easy to obtain and have simple eligibility requirements. Today, households can easily raise funding from this idle asset by leveraging its underlying value. Repaying gold loans is also simple, as you can pay them via easy EMI payments, bullet repayments, or other options. Here’s how gold loans work and the repayment options available to ensure a seamless repayment plan and journey.

Gold loans have emerged as popular financial instruments, providing individuals a quick and easy way to generate income by pledging their gold assets. There is considerable ease in the application process, less documentation involved, funding availability and multiple repayment options. A borrower opts for a gold loan based on a couple of these favourable options.

Now that the borrower is using the gold loan proceeds, they are also bound by the obligation to repay. The gold loan repayment begins after the loan has been disbursed. Repayment involves repaying the principal and the interest component.

Understanding the gold loan repayment process is essential. It ensures the return of the borrowed amount without compromising the security from the time of repayment. Thе dynamics of gold loan repayment involvе a structured systеm that ensures thе rеturn of borrowed funds without compromising thе sеcurity pledged.

Examining the nuances of gold loan repayment involves delving into the methods of calculating interest rates, repayment options, and basic steps borrowers must take to fulfil their obligations to repay the loan.

In this blog, we will understand the gold loan repayment process.

What Is Gold Loan Repayment?

Gold loan repayment consists of repaying the principal amount financed and the interest accumulated by the lender. As gold loans are secured loans, borrowers can choose from various repayment options to suit their requirements and regain possession of the gold they pledged.

Gold loan repayment is an essential aspect of taking a loan. It is fulfilling one’s responsibility of returning the borrowed amount, which is the principal amount with the accrued interest promptly. The loan agreement specifies all the important details, such as the interest rate, the tenure, value of the gold loan and other information. It is еssеntial for borrowеrs to undеrstand thе terms and conditions of thе gold loan repayment, including intеrеst ratеs and tеnurе and any prepayment or forеclosurе options. Clеar communication with thе lеndеr and adhеrеncе to thе agreed upon rеpaymеnt schеdulе arе crucial for a smooth gold loan rеpaymеnt procеss.

Failurе to repay the loan within the specified timе may lead to pеnaltiеs, additional charges and/ or thе possibility of thе lеndеr auctioning thе plеdgеd gold to recover the outstanding amount. The lender may even initiate legal action as a last resort, subject to them classifying the loan as a non-performing asset.

How does gold loan repayment work?

An important aspect of any loan is its repayment. Interestingly, because a gold loan is a secured loan, a borrower is offered a repayment plan that suits their convenience. In general, the rate of interest and the gold loan repayment period differ slightly from lender to lender.

Given this, the different ways of gold loan repayment options include paying the principal and interest amounts as Equated Monthly Instalments (EMIs). A borrower may also pay the interest as EMIs and the principal amount at the end of the tenure, make partial repayments throughout the tenure, and finally, bullet repayments. There is also the refinancing option, where, if the borrower is already repaying gold loans at a high interest rate, they can consider refinancing from a lender offering a lower interest rate. When opting for either of the repayment options, the borrower must know all the details of the repayment method they choose.

IIFL Finance offers the IIFL gold loan repayment online option, too. The borrower can pay by downloading the IIFL Loans Mobile app.

Gold Loan Repayment Procedure

The Gold loan repayment procedure is the way in which a borrower opts to make their gold loan repayment. Some gold loan repayment options available to borrowers are EMIs, bullet repayment, partial repayment, loan refinancing and foreclosure.

When borrowers opt to make payments via EMIs, they make regular payments throughout the loan term.

With the bullet repayment gold loan option, the borrower can repay the entire amount at the end of the loan tenure. They need not make repayments as per any EMI schedule.

Another option is to make partial repayments as per the availability of funds. Here, the borrower pays off the entire principal and interest amount before the end of the term of the loan.

When opting for the refinancing option, the borrower takes another loan on better and revised terms and one that offers a lower interest rate.

In a foreclosure, the borrower pays off the entire principal and interest amount before the end of the tenure and closes the loan.

Typically, loans are repaid through monthly installments, each containing an interest and principal component. Repayment procedures for gold loans adjust the monthly obligation, making the advance easier to repay.

What are the best ways to repay your gold loan?

1. Repayment Through Interest-Only EMIs

Gold loan borrowers can choose the interest-only repayment option to repay their loans on time. The borrower must repay the loan principal at the end of the tenure after paying the accruing interest through installments.

2. Partial Principal Repayment With Flexible Interest Payment

Borrowers can make interest payments according to a flexible repayment schedule while repaying the principal amount in parts throughout the tenure. During the loan term, it eliminates the need to fulfill a fixed liability monthly.

Regardless of the gold loan interest rate, the repayment of a significant portion of the principal during the early stages of the tenure means a reduced overall interest liability for the borrower.

3. Easy Monthly Installments (EMIs):

This is a popular option that allows you to spread the repayment of your loan principal and interest over a fixed period, typically ranging from a few months to several years. The EMI amount remains constant throughout the tenure, making budgeting and planning easier.

4. Bullet Repayment:

This option allows you to pay only the interest on your loan during the tenure and repay the entire principal amount in a lump sum at the end. This can be beneficial if you are expecting a large sum of money in the future, such as a bonus or salary hike.

5. Partial Payments:

If you have some extra cash on hand, you can opt for making partial payments towards your loan principal. This can help you reduce the interest burden and potentially shorten your loan tenure. However, ensure you check with your lender if there are any prepayment charges associated with this option.

6. Full Repayment:

You can also choose to repay your entire loan amount, including principal and interest, at any time before the maturity date. This is a good option if you have the funds available and want to save on interest charges.

7. Monthly Payment of Interest:

Another popular option is just to make monthly payments of only the interest accrued on the gold loan. It helps you effectively manage your cash flow by paying only the interest amount on a regular basis. However, keep in mind that this does not reduce the principal amount of the loan. Be sure to check all the terms and conditions of the interest-only payments before you commit to this gold loan repayment process.
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8. Monthly Repayments In EMIs

Borrowers can repay gold loans via EMIs, the most common form of repayment. They are composed of principal and interest components amortised over the term of repayment. By reducing interest accrual, borrowers will have a lower loan liability, making repayments more convenient.

To make gold loans more affordable, secure a minimum lowest gold loan interest rate by applying with a high income and keeping all the necessary documents handy.

Know how gold loan repayment mode can impact your interest rate?

Thе way one choosеs to rеpay their gold loan can significantly impact thе intеrеst charged. Opting for frequent rеpaymеnts likе monthly EMIs minimisеs risk for thе lеndеr and typically еarns you a lower interest ratе. In contrast, infrequent rеpaymеnts or bullеt paymеnts carry morе risk and, so higher intеrеst chargеs. Making еarly or partial paymеnts against thе principal can furthеr rеducе your intеrеst burdеn. Intеrеst only initial paymеnts might hеlp with immеdiatе cash nееds, but ultimatеly cost morе duе to compounding. Rеmеmbеr, prioritising an affordablе and consistеnt rеpaymеnt plan that aligns with your financial situation is crucial.

Know your gold loan repayment period?

At IIFL Finance, the maximum tenure to repay a gold loan is at least six months, and the maximum is 24 months.

In India, the majority of gold loan repayment takes place between three months to 36 months and, in some cases, 48 months.

Gold loan repayment methods:

Equated Monthly Instalments

In this method of repayment, the principal and interest amount are paid together. This option is best suited to people with fixed monthly incomes. The EMI method is a regular way of repaying the gold loan, much like home or car loans.

Pay Interest as EMI and Principal Later

This is also an EMI-like option. But in this case, the borrower pays the interest based on an EMI schedule. Then, the principal amount is paid at the end of the tenure of the loan. This option can be helpful as the borrower is liable to pay only the interest during the tenure of the loan but must, however, plan to pay the principal amount later.

Make Partial Payments

In this option of gold loan repayment, the borrower makes partial payments of the principal and interest amount as per their availability of funds. This is a convenient option as there is no EMI schedule. Initially, upon payment of the principal, the total interest pay-out, which is calculated daily, reduces. This helps the borrower save considerably on serviceable interest.

Bullet Repayment

In the bullet gold loan repayment process, the borrower repays the entire principal and interest amount at the end of the loan term. Here, the interest rate is calculated every month throughout the tenure of the loan. However, the borrower can pay the bulk of the principal and interest amount as a single payment. Hence, it is called a bullet repayment.


Rеfinancing a loan involvеs rеplacing an еxisting loan with a nеw onе and oftеn to sеcurе bеttеr tеrms such as a lowеr intеrеst ratе or rеducеd monthly paymеnts. Thе aim is to improvе thе borrowеr's financial situation and potentially save monеy ovеr thе lifе of thе loan.


Foreclosure is an option where the borrower can pay for the entire principal and loan amount before the end of the tenure. This way, borrowers can save on the interest amount as the interest amount for the balance period will be waived off.

Key Takeaways

Importancе of Rеpaymеnt:

Timely rеpaymеnt is crucial for еnsuring financial rеsponsibility and protеcting the gold.

Flеxiblе Rеpaymеnt Options:

Choose a plan that suits your nееds. EMIs, intеrеst- only EMIs, partial payments, bullеt rеpaymеnts and refinancing and foreclosure.

Interest Ratе Impact:

Regular rеpaymеnts (EMIs) typically attract lowеr interest rates, whilе infrequent rеpaymеnts or bullеt paymеnts tend to be more еxpеnsivе.

Rеpaymеnt Pеriod:

Loan tеnurе usually rangеs from 6 months to 48 months. IIFL Financе offеrs a minimum of six months and a maximum of 24 months.

Default Implications:

Failure to repay carriеs pеnaltiеs, potеntial auctioning and lеgal action.

Apply For A Gold Loan With IIFL Finance

Gold loans from IIFL Finance offer the best features to maximise your benefits. Taking a gold loan with IIFL Finance has many advantages, including low-interest rates, advantageous terms, and instant approval. The gold loan process is designed specifically to meet your capital needs, with a wide range of unique and comprehensive features.

Our gold loans don't require you to submit prolonged loan applications. A gold loan with IIFL Finance requires only an identification card and address proof.


We looked at the main aspects of gold loan repayment, from how does gold loan repayment work to the gold loan repayment period. We also looked at the different ways of gold loan repayment, such as the EMI method, partial payment method, paying interest as EMI and principal later, refinancing and the foreclosure method.

A gold loan makes everything possible. Be it your personal dreams, professional needs or medical reasons. Apply for a Gold Loan from IIFL Finance. IIFL Finance is a one-stop lending institution for loans, including business and personal loans. IIFL’s gold loan portfolio includes Agriculture Gold Loan, Education Gold Loan, Gold Loan for Women, Gold Loan for MSME and Digital Gold Loan.

Frequently Asked Questions

Q1. What is the repayment period of a gold loan?
Ans. The repayment period of gold loans spans anywhere from 6 months to 24 months.

Q2. What is the best way to pay a gold loan?
Ans. EMI, or Equated Monthly Installment, is the most common payment plan for gold loans.

Q3. What is the process of gold loan lending?

The gold loan lending process is generally quite straightforward. Here's what it usually involves:

  • Approaching a lender (online or branch).
  • Submitting documents (ID, address, gold ownership proof).
  • Gold valuation by the lender.
  • Loan approval and agreement signing.
  • Gold deposit with the lender.
  • Loan disbursal.

Q4. What happens if I am unable to pay my gold loan?

If you are unable to repay your gold loan on time, there may be consequences, which can vary depending on the lender's policy and specific loan agreement. Here are some potential scenarios:

  • Late fees: Most lenders charge late fees for missed or delayed payments.
  • Default: If you consistently miss payments, your loan may be classified as a default. This can negatively impact your credit score and make it difficult to obtain future loans.
  • Loan foreclosure: In extreme cases, the lender may initiate legal proceedings to recover the loan amount. This may involve selling your pledged gold to settle the outstanding dues.
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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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