What Is Bullet Repayment Gold Loan? Know Features And Benefits

What Is Bullet Repayment Gold Loan?

A bullet repayment gold loan is where the borrowers repay the principal loan amount along with the cumulative interest in a single lump sum payment. Unlike a traditional lending structure, in a bullet loan, the borrower repays the entire amount at the end of the loan tenure instead of EMI payments. In short, a bullet repayment gold loan means a loan in lieu of gold where borrowers have to repay the interest and principal amount in a lump sum.

This structure makes it particularly attractive for individuals who have irregular income and cannot afford to repay in installments. For example, if a borrower takes a gold loan of ₹ 50,000 at a 12% rate of interest for six months, they will have to repay the interest of ₹3,000. This means that the bullet repayment amount will be ₹53,000.

Features of Bullet Repayment Gold Loan

A bullet repayment gold loan consists of several distinctive features, such as a lump sum repayment structure, which eliminates the need for monthly financial commitments. Let’s know the features one by one:

Lump-sum Payment

A bullet repayment has the facility of a lump sum payment instead of broken payments. Unlike the traditional system of loan repayment, in this case, the facility of one-time repayment exists.

Flexibility for Borrowers

Borrowers become highly flexible by paying off a lump sum amount instead of smaller composite payments of interest. This saves borrowers who do not have a stable income or cannot pay a monthly interest because of other financial commitments.

No Strain on Income

Usually, gold loans are hefty amounts, and the payment of interest financially strains the borrower. A gold bullet repayment does not ask for periodic interest payments, which also makes the process essentially flexible for the borrower.

Maintains LTV for NBFCs

NBFCs can serve people with a lower income range with a bullet loan repayment scheme. A bullet loan raises the LTV, which also enhances the lending capacity of NBFCs, easing the credit disbursement system for them.

Simplified Documentation

Another significant feature is the simplified documentation process. Gold loans generally require minimal paperwork, and borrowers need to submit only basic identity proofs such as an Aadhaar Card and PAN details. This makes bullet repayment a widely adopted loan scheme among borrowers and NBFCs across India.

How Bullet Repayment Works For Gold Loans?

Let’s now understand how a bullet repayment gold loan works in real life.

• The borrower submits their gold assets to the lender for valuation.
• The lender assesses the gold's purity and weight.
• The borrower fills out the loan application form specifying the loan amount and tenure of the loan, and submits the required documents.
• Upon document submission, the lender assesses the creditworthiness of the borrower.
• At the deadline of the loan tenure, the borrower repays the entire principal and accrued interest in one go.

Note that in case of failure to repay, the NBFC has the legal right to auction the pledged gold to recover the outstanding dues.

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Benefits of Bullet Repayment Gold Loan

Bullet repayment gold loan structures offer multiple advantages for specific borrowers from different categories. For example, borrowers are not pressured to repay the interest at periodic intervals.

Here are 4 benefits of bullet repayment in a gold loan:

No Financial Pressure

Individuals with irregular income streams find bullet payments advantageous as they align with their business cycles. If you are running a business that doesn’t provide you with a regular income, or most of the income is owed for your business, a bullet repayment structure is highly helpful.

Flexible Loan Repayment

Borrowers can keep on accumulating the lump sum money, knowing the exact maturity date. This gives them greater financial freedom, as they can invest or spend their money elsewhere during the period. For instance, many businesses take advantage of the gold bullet repayment as they get the flexibility of investing elsewhere.

Quick Access To Funds

Most businesses do not prefer a monthly financial obligation owing to several investments they have to undertake. A gold bullet repayment offers them quick access to funds without monthly repayment obligations. This also offers a more straightforward way to secure funds for those who need urgent financial assistance.

Demerits of Bullet Repayment of Gold Loan

A gold bullet repayment carries certain disadvantages besides being a flexible credit option for businesses.

High Interest Rate

With bullet repayment, the interest rate is calculated on the entire principal for the full term. This means borrowers have to pay more interest than borrowers with reducing-balance EMI loans.

Needs Advanced Financial Planning

A bullet loan repayment needs a lump-sum payment, which requires the business to follow rigorous financial planning. Without planning every step of the investment, a business may fail to repay the lump sum.

Risk of Losing Gold

A major challenge with a bullet repayment system is that the borrower can lose the pledged gold in case of failing to repay. If the valuation of the gold is more than the loan itself at the end of the loan tenure, the borrower faces a massive loss.

New Directives of RBI For NBFCs On Bullet Repayment of Gold Loan

We have understood what is bullet repayment gold loan, now let’s know the latest directives by the Reserve Bank of India (RBI). In October 2025, RBI has passed several guidelines on bullet repayment of gold loans, which are:

• NBFCs and similar banking institutions are directed to calculate the LTV ratio based on the maturity value of the loan rather than the original loan value
• Borrowers need to repay the loan with interest in a lump sum within 12 months
• The LTV ratio will now be maintained at 75-85% for all gold loans disbursed by the NBFCs under loans of ₹2.5 lakh

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How Do RBI Gold Loan Norms Impact NBFCs?

The new directive by RBI for bullet repayment gold loan significantly impacts most NBFC operations.

Reduction In Borrowers Amount

The regulatory mandates presented by RBI can narrow the loan disbursement margin because of the 12-month limit. Many borrowers may not be able to take loans because of the compulsory repayment within 12 months.

Low Loan Disbursement Volume

NBFCs are expected to witness a decline in disbursal volumes. Gold loans may be reduced because of stricter compliance, and NBFCs may also have to offer additional benefits to balance their lending capacity.

Higher Cost of Compliance

RBI mandates on bullet repayment gold loan is bound to incur a higher cost on the NBFCs, as there are several documentations involved in the credit process. This can increase the cost of lending, which eventually shrinks most NBFCs’ capacity to lend.

Increased Risk of Loan Disbursement

Now that RBI has increased the LTV ceiling, the risk of lending also multiplies for NBFCs. A higher LTV means NBFCs are lending a higher proportion of the loan, which poses a threat to them in case the borrower defaults.

Conclusion

For NBFC leaders and banking institution executives, understanding what a bullet repayment gold loan is crucial for managing an effective portfolio and minimizing their risks. Bullet repayment is also a boon for the borrowers, as it offers high flexibility and doesn’t impose a financial commitment on the borrowers. They do not have to commit to a monthly or quarterly payment of interest, and can invest their funds anywhere till the tenure expiry.

Also read the best government business loan schemes for women entrepreneurs in India.