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I have a housing loan of 27 lakhs with the interest rate of 10% for 5 years.

Is it really worth if I take gold loan and do a housing loan pre-payment out of it?

I understand that gold loan is costlier than housing loan.

Considering the long time payment term and big principal involved, will the gold loan interest amount be offsetted by the money saved on housing loan interest?

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    What does it mean to "take gold loan"?
    – ChrisInEdmonton
    Commented Jul 6, 2016 at 13:37
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    I'm not familiar with the Indian financial system and institutions, but ignoring the specifics, consider this: If Approach X is "costlier" than Approach Y, then is it worth going with Approach X instead of Approach Y? What makes you think the "costlier" approach will somehow "offset" the cheaper approach?
    – user
    Commented Jul 6, 2016 at 15:01
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    @ChrisInEdmonton It means taking a secured loan with Gold as collateral. A very common practice, the gold can be physical bullion or jewellery that is handed over to the financial institution for the period.
    – Dheer
    Commented Jul 6, 2016 at 16:29
  • @chrisinedmonton: I meant to pledge gold in the bank. I used that word in Indian context..
    – Purus
    Commented Jul 6, 2016 at 16:52
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    @Joe This is India, a developing country. Generally in developing countries you have high growth rate, leading to higher inflation [around 2 digits]. This pushes deposit rates to match inflation rates [at times slightly higher, at times slightly lower]. Thus lending rates are high. The ticket size of Gold loans are small and there is a cost of physically securing Gold resulting in higher transaction cost compared to a home loan. Generally Gold loans are for lower income strata who are desperate to get some money for emergency purpose and are often don't have Bank accounts.
    – Dheer
    Commented Jul 7, 2016 at 3:44

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No it is not. If you are able to afford the EMI on the gold loan, just increase the EMI on your home loan and you will save more.

Example: If your home loan EMI is say 65000, and the EMI for 10 lacs Gold loan is 15000, increase the Home loan EMI to 80000....

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