If you have been on the lookout for an easy and efficient way to meet the immediate need of cash, for one or more purposes, you may have likely come across two alternatives, namely Gold Loan and Personal Loan. While both these credit types are similar when considered on the lines of modest interest rates as well as quick approval and disbursal of the loan, there are a few differences, which is why one of these can prove to be more beneficial for you than the other.
Let us dive into the benefits of each of these types of loans and help you enjoy a broader picture, to facilitate better decision making on your end!
A Gold Loan, as the name suggests, is a credit that can be procured by pledging gold as collateral to the lender. Given that it is a secured loan, the creditworthiness or history of the borrower isn’t given much emphasis. However, the quality of gold is considered. This credit is usually offered at an interest rate ranging from 9.60 to 26%. Here are some of the reasons, why this loan has been gaining popularity in recent times.
As compared to other forms of credit, one can easily conclude that Gold Loans require the least amount of documentation. All that is needed is the borrower’s photo identity proof, and the address proof.
This isn’t the same when it comes to applying for Personal Loans, as proof of income, as well as bank statements, form an important part of the required documentation for the application process.
When it comes to availing a loan amount of your choice, Gold Loans prove to be, well, GOLD. We say so because you can avail an amount as low as 1,000 and get a loan of up to 1.5 Crores as well.
This massive range of amount makes this loan accessible and convenient for people from all walks of life. Of course, the amount you can obtain as the loan is usually capped at 70-75% of the total market value of the precious metal that you are giving as collateral. Here, you must note that in case of Personal Loan, the available amount of ten ranges from 50,000 to 25 Lakhs, and in some instances 50 Lakhs, which is much less than that available through Gold Loans.
Given that Gold Loans are entirely secured, it doesn’t come as a surprise that they do not warrant any stringent checks pertaining to the credit score from the lender. After all, the lenders always have the alternative of recovering any outstanding loan amount by selling off the gold pledged by the borrower.
This, however, is only true for cases where the desired loan amount is within reasonable limits. For anyone looking for a loan of 50 Lakhs or above, the credit score scrutiny is entirely unavoidable.
This isn’t the case when it comes to Personal Loans, as they are inherently unsecured. While giving out a Personal Loan, lenders pay keen attention to the repayment history of the borrower, to ensure that they are not getting in a bad deal.
No credit type enjoys the incredible level of flexibility pertaining to the repayment, quite like the Gold Loan. In this case, the borrower is free to repay the loan, in any of the following three formats:
As mentioned earlier, a Personal Loan is primary an unsecured loan, which can be obtained with the aim of meeting one or more financial obligations. This loan attracts an interest rate ranging from 11 to 22% depending on the credit history of the borrower.
Since the lender has no collateral to fall back on, in case of defaults, a high emphasis is placed on proof of income as well as well as the creditworthiness of the borrower.
More often than not, a Personal Loan can easily be availed for 1 to 5 years. In fact, some banks also offer an extended tenure of seven years to their regular or otherwise trustworthy customers. This is far greater than the maximum tenure of 3 years which is provided in case of gold loans. Owing to longer tenure, borrowers availing Personal Loan can easily enjoy a comparatively lower equated monthly instalment (EMI), thus repaying their loan quite comfortably.
Thanks to the unprecedented boom in the online lending industry, a Personal Loan can now be availed with the borrower sitting in the comfort of their own home or office. All the requite documents can be uploaded on the lender’s platform, and the disbursed amount can be received through electronic transfer.
This isn’t the case with the Gold Loan. Since the pledged gold needs to be measured for weight and checked for purity, the borrower is required to visit the credit provider at least once, during the course of loan application. This may create some trouble for the patrons who either don’t want to or simply cannot visit the lender’s office, due to living in remote areas of the nation.
Considering that both loans come with their own set of advantages and limitations, you should opt for the one that best suits your needs. If you wish to repay your loan at a slow and steady pace, apply for a Personal Loan. On the other hand, if your credit score is notably lower than average, Gold Loan may prove to be the best alternative for you, when you wish to gain quick access to some additional funds!
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