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 — and 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.