How does a gold loan top-up affect the tenure of the existing gold loan?

A gold loan top-up allows existing borrowers to avail of additional credit without pledging more gold, but its impact on loan tenure depends on the banks or Non-banking Financial Companies (NBFCs) and products.

1. Additional Interest Cost: With a top-up, the loan amount increases, so the total interest outgo also rises. Typically, loan providers will charge interest on the full outstanding amount, including the original loan and the top-up credit.
2. Loan Tenure Extension: Some financial institutions may provide the top-up by simply increasing the tenure of the existing loan to keep Equated Monthly Instalments (EMIs) affordable. For example, a top-up may extend a 12-month gold loan to 18 months. However, this is at the discretion of the lending institution.
3. No Tenure Change: Alternatively, other lenders may not extend the original loan tenure. The borrower has to pay the existing EMI on the old principal and an additional EMI on just the top-up amount.