EMI vs. bullet repayment for gold loans

Gold loans commonly offer a choice most other loans don’t: pay it down every month like a normal EMI, or pay only interest until the very end and clear the whole principal in one shot. The second option looks lighter month to month. It isn’t lighter overall.

Two genuinely different repayment structures

An EMI schedule pays down principal and interest together every month, so the balance interest accrues on keeps shrinking. A bullet schedule only requires interest payments each month, with the entire original principal due in one lump sum at maturity: because none of it amortizes early, every month’s interest is calculated on the full, untouched principal, not a progressively smaller balance.

The same loan, the same rate, two very different totals

Run this calculator’s own default (50 grams of 22K gold at ₹14,650/gram, a ₹5,03,594 eligible loan at 10.5% p.a. for 12 months) through both structures.

Bullet repayment isn’t a mistake to avoid outright: a much smaller monthly outflow can genuinely matter for someone bridging a short-term cash gap who expects a lump sum later. But it’s worth knowing upfront that the lighter monthly payment comes with a real, quantifiable cost attached.

Why the gap grows with tenure, not just stays fixed

Since bullet interest never shrinks off a smaller balance, stretching the tenure compounds the disadvantage rather than just adding more months at the same gap: EMI’s balance keeps shrinking for longer, while bullet’s stays exactly where it started.