Is prepayment allowed in a gold loan?

Yes, you are generally allowed to prepay a gold loan before the agreed tenure ends. This means you can settle your outstanding principal and interest at any point during the loan period and reclaim your pledged gold ornaments or coins. Many borrowers choose to prepay their gold loans when they have surplus funds or if they want to reduce the total interest paid over the life of the loan.

Here’s what you should keep in mind about prepaying a gold loan:

• Most lenders permit prepayment, but the terms can vary. Some may allow you to prepay the loan without any additional charges, while others might levy a small prepayment or foreclosure fee. This fee is usually nominal and is clearly mentioned in your loan agreement.
• By prepaying your gold loan, you can save on interest, as interest is typically calculated on the outstanding amount for the duration the loan is active. The earlier you repay, the less interest you end up paying.
• The process for prepayment is straightforward. You simply visit the lender’s branch, pay off the dues, and complete any necessary paperwork. Your gold is then returned to you after verification.
• It’s always a good idea to check your lender’s specific prepayment policy before taking the loan, so you’re aware of any potential charges or requirements. Prepaying your gold loan not only saves money but also gives you peace of mind by clearing your debt sooner.