Gold Loan vs. Personal Loan. Which is better and Why?

A “gold loan” is a loan that is backed by gold, jewellery, or other precious metals. This increases the lender’s security, which increases your chances of getting a loan granted. A gold loan is a great way to pay for personal costs. The loan amount is more and the interest rate is lower when compared to a personal loan. Personal loans may be used to cover an emergency expenses. However, if you don’t have much money to put down or have bad credit, it could be difficult to secure a personal loan. If you think you need a personal loan but don’t have much money to put up as security, a gold loan can be the answer for you.

Below is a list of the top 5 advantages of gold loans versus personal loans.

Processing and documentation time

Borrowers are not required to provide any type of security for personal loans, although gold holdings may be used as security for gold loans. People would look for a gold loan or a personal loan when they are having financial difficulties because lenders can process them quickly. However, individuals must also submit supporting documents, such as income or address verification, along with their loan application. Gold loans are more effective at disbursing money than personal loans, despite the fact that this is a time-consuming process in and of itself.

Borrowing fees

Regarding personal loans, there is no security offered to banks. The lending institutions then carefully review the applicant’s supporting documents for evidence of income. They consequently impose minimal processing fees on personal loans. Personal loan processing fees typically range from 0.5% to 1% of the loan amount. Borrowers looking for a gold loan are not required to present any documentation proving their income because they are using their gold assets as collateral. This estimate excludes processing expenses.

Loan period

When they receive personal loan applications, lenders—whether banks or non-bank financial institutions—evaluate the strength of the supporting documentation in the absence of collateral. They also do thorough research to ensure that the applicant has the necessary repayment capacity. The financing could be delayed because of this drawn-out procedure. However, the procedure for a gold loan is straightforward. Borrowers provide gold as collateral and sign a number of documents. After that, the loan amount is approved.

Flexible repayment options

With a personal loan or a gold loan, the borrower can repay their debt through an EMI and get beyond most repayment restrictions. However, gold loans offer a more flexible repayment. This implies that obtaining a gold loan will be less expensive for the borrower than obtaining a personal loan. Repaying gold loans is therefore a little easier than repaying personal loans, even if they were made for the same amount of money.

When should one make a gold loan application?

If you need money for urgent personal reasons and wish to repay the loan quickly, a gold loan is a good solution. There are no restrictions on how or what you can use the loan money for, so these fees could be used for organising a wedding, paying for a child’s education, paying for unanticipated medical costs, remodelling your home, or even taking a trip.

Options than personal loans can. 

Since they ensure on-time payments, secured loans are more tolerant of customers. Borrowers of gold loans can choose from a number of different repayment options. The borrower merely needs to select the standard EMI option when repaying a gold loan. They also have the choice to decide whether to return the principle plus interest once the mandate is through. The loan balance and interest can be paid in full by the borrower at the end of the period. Gold-backed loans offer solutions to boost your capacity for repayment, giving you the greatest chance possible.

Decreases in interest rates

It is obvious that gold loans have lower interest rates than personal loans do. While loans for gold are accepted at a rate of 11 to 13%, loans for personal use are given out at a rate of 16 to 22%. It can be calculated using a gold loan interest rate calculator.

When should one make a gold loan application?

If you need money for urgent personal reasons and wish to repay the loan quickly, a gold loan is a good solution. There are no restrictions on how or what you can use the loan money for, so these fees could be used for organising a wedding, paying for a child’s education, paying for unanticipated medical costs, remodelling your home, or even taking a trip.

Conclusion

When financing major items like a car or house renovation, personal loans are not the greatest choice. You can get a gold loan without having to meet onerous qualification requirements because they are less stringent than personal loans. The loan amount is more and the interest rate is lower when compared to a personal loan. For this reason, a gold loan is more advantageous than a personal loan for financing pricey items.