When people need quick money, pledging gold often feels like the easiest way out. But
CA Abhishek Walia, co-founder, Zactor Money, recently explained this through a real-life example. He wrote on LinkedIn, “Two people pledged the same amount of gold. One paid Rs 12,000 in interest. The other paid almost double. The difference? How they borrowed.”
Both borrowers needed Rs 3 lakh for short-term expenses. One opted for a gold loan, while the other chose a gold overdraft.
“The first took a gold loan — a fixed lump sum, 8–9% annual interest, clear EMIs, and a predictable repayment plan,” said Walia.
The second borrower picked a gold overdraft, which offers flexibility. You can withdraw money whenever needed and pay interest only on what you use. “Sounds smarter, right?” asked Walia.
It did — until the value of gold dropped.
When gold prices fell, the bank revalued the pledged gold. The borrower with the overdraft was asked to repay part of the outstanding amount to maintain the 75% loan-to-value ratio.
“He hadn’t planned for that,” said Walia, adding that the borrower had been paying only interest, not the principal. “What started as flexibility turned into stress.”
This shows how market fluctuations can directly impact those who choose overdraft facilities without a repayment plan.
In a gold loan, the borrower gets a fixed sum with clear EMIs and a defined tenure. It suits people who prefer structure and clarity.
A gold overdraft, on the other hand, works more like a credit line — you can withdraw multiple times within your limit, but managing it requires discipline.
“That’s the real difference,” Walia explained.
“A Gold Loan works best if you want structure and clarity. A Gold Overdraft works if you need flexibility, but it can hurt you if you’re careless,” he stated.
If you need funds just once — say for an emergency or a short-term goal — a gold loan is usually better. It comes with fixed repayments and no surprise calls from the bank.
But if you often need funds and know you can manage repayments smartly, an overdraft can offer freedom and convenience.
As Walia summed it up, “Both let you unlock the value of your gold. But one keeps you in control — the other tests your control.”