How Gold Loan EMI is Calculated
EMI (Equated Monthly Installment) is the fixed amount you pay every month to repay your gold loan. It includes both principal repayment and interest. In the early months, a larger portion goes toward interest; in later months, more goes toward principal.
EMI Formula
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
Where P = Principal loan amount, r = Monthly interest rate (Annual rate ÷ 12 ÷ 100), and n = Number of months (tenure).
Example Calculation
For a ₹2,00,000 gold loan at 10% annual interest for 24 months:
- Monthly rate (r) = 10 ÷ 12 ÷ 100 = 0.00833
- EMI = ₹2,00,000 × 0.00833 × (1.00833)^24 ÷ ((1.00833)^24 − 1)
- EMI ≈ ₹9,225 per month
- Total Interest = ₹9,225 × 24 − ₹2,00,000 = ₹21,400
- Total Payable = ₹2,21,400
Gold Loan EMI vs Regular Loan EMI
Gold loans typically have shorter tenures (3–36 months) compared to personal loans (12–60 months). The interest rates for gold loans range from 7% to 26% depending on the lender. Banks like SBI offer rates as low as 8.65%, while NBFCs charge higher rates but offer faster processing.
Tips to Reduce Your Gold Loan EMI
- Compare rates across multiple banks and NBFCs before borrowing
- Choose a longer tenure to reduce monthly EMI (but total interest increases)
- Negotiate processing fees — many lenders waive or reduce them for existing customers
- Consider bullet repayment if you can repay the full amount at maturity
- Make partial prepayments when possible to reduce outstanding principal