Three ways a gold loan is repaid
A gold loan is secured on gold jewellery, coins or bars that you hand to the lender, and you get the gold back when the loan is repaid. Offers differ in how the loan is paid back, and the way you repay changes the cost far more than the rate does.
With equal monthly instalments (EMI) each payment covers that month's interest and part of the loan, so the balance falls and the interest falls with it. With interest each month you pay only the interest and the loan is repaid at the end. With one payment at the end, a bullet loan, nothing is paid until the loan and all its interest fall due together.
The calculator works interest out each month at one twelfth of a yearly rate, or at the monthly rate if your quote is monthly. For the last two types the interest is simple: it is worked out on the whole loan and never added to it. Your loan documents say which method your lender uses, and a loan charged by the day can differ slightly.
Worked example
Take ₹1,00,000 at 9.9% a year for 6 months. As one payment at the end, you pay ₹1,04,950.00 at the end, which is ₹4,950.00 in interest. Because the whole loan is outstanding for the whole term, that is an effective annual rate of 10.15%.
Paying the interest each month costs ₹825.00 a month, with a final payment of ₹1,00,825.00 that includes the loan. The total interest is the same, and the effective annual rate is 10.36% because the interest is paid as you go.
As equal monthly instalments, the same loan has an EMI of ₹17,151.21, with ₹2,907.27 in interest and ₹1,02,907.27 in total. The interest is lower because you repay part of the loan every month, so the balance that earns interest keeps falling.
At a larger scale, ₹40,00,000 at 8% a year over 12 months as an EMI loan has an EMI of ₹3,47,953.72 and ₹1,75,444.60 in interest.
Comparing repayment types and fees
The same rate is not the same cost. ₹1,00,000 at 12% a year for 12 months costs ₹12,000.00 as simple interest, whether paid monthly or at the end, but ₹6,618.55 as an EMI loan. The calculator shows both so you can see what your repayment type is worth.
A processing fee is taken from what you receive, so you pay interest on money you never get. A 1% fee on ₹1,00,000 at 12% over 12 months in EMIs adds ₹1,000.00, so interest and fee together are ₹7,618.55, and the effective annual rate rises to 14.84% against 12.68% with no fee.
For a loan paid in one go, with simple or monthly compounding and a loan-to-value check, use the bullet repayment gold loan calculator.
To see whether a gold loan is the cheapest way to borrow, try the gold loan vs personal loan calculator.
If you cannot repay
Your loan documents and the lender's auction policy say what happens to the gold if you do not repay. Check what happens if you miss a payment, whether a late payment is charged extra, how any surplus from a sale is returned, and whether there are valuation or storage fees. This calculator shows the cost of one term and does not apply any lender or regulator rule, so enter the rate and fee from your offer.
Inputs for the gold loan calculator
Repayment type
Equal monthly instalments, interest each month with the loan at the end, or one payment at the end.
Loan amount
The amount you borrow against your gold.
Interest rate
The rate on your quote. The rate shown is only an example, so enter your own.
Rate is quoted
Choose per year or per month to match your quote.
Term
The months the loan runs, from 1 to 60.
Processing fee
A fee as a share of the loan, taken from what you receive. Enter 0 for none.
CALCULATOR QUESTIONS
Gold loan calculator questions
How is a gold loan EMI calculated?
The EMI is the loan times the monthly rate, divided by one minus the monthly rate plus one raised to minus the number of months. Pick equal monthly instalments above and the calculator does it for you.
Is interest each month cheaper than an EMI loan?
No. At the same rate, paying interest only keeps the whole loan outstanding, so it costs more. In the example, ₹12,000.00 against ₹6,618.55.
What is the effective annual rate?
The yearly rate that the payments and the money you receive work out to, counting a fee and the timing of payments. It lets you compare loans repaid in different ways.
Does this show how much I can borrow against my gold?
No. It works out the repayments on a loan you already have an offer for. Use the gold loan amount calculator to estimate how much your gold could secure.
Does the calculator apply a lender's rules?
No. The rate, the fee and the term come from your offer, and the calculator applies no lender or regulator limit to them.