What is bullet gold loan?

A bullet gold loan is a type of repayment structure where the borrower pays both the principal and the accumulated interest in a single payment at the end of the loan tenure. Unlike EMI-based loans, there are no monthly repayments during the loan period. Interest accrues each month and is added to the principal, with the total amount due at maturity. This option can be suitable for borrowers who expect to receive a lump sum in the future or have irregular income. However, it is important to note that the effective cost may be higher due to the accumulation of interest over the entire tenure. As per the latest RBI guidelines, the maximum tenure for bullet repayment gold loans is capped at 12 months. Borrowers should ensure they have a clear plan to repay the total amount at the end of the period to avoid default and the risk of their pledged gold being auctioned.