Gold loans are safe and better option as compared to personal loans. Gold loans are more advantageous than personal loans with respect to interest rate, documentation required, tenure and processing charges.
First, we will understand the meaning of the concepts of gold loan and personal loan.
What is gold loan?
Gold loan refers to the financial assistance given by the institution or bank according to the gold provided by you. Gold loan is generally given up to 80 percent of the value. Gold can be in the form of jewelry. It must be surrendered to the bank or institution.
What is personal loan?
Loan provided by banks to individuals as per their credit report and income records is known as personal loan. Here, you are not required to provide any security. The interest rate is higher and you need to repay the loan by fixed EMIs as per the tenure.
Which is Quicker?
Processing time for a Gold Loan is less than one hour, whereas the processing time for personal loan may be from 1~5 days. The processing times varies for different financial institutions, still Gold loan is a winner in terms of processing time.
Difference with respect to rates of interest charged
As application of personal loans does not require submission of collateral security, the interest rates are considerably higher. But in case of gold loans, you are offering gold ornaments as security to the financial institution. Hence, you are charged with lower rates of interest. Gold loan is better with respect to interest rate.
Difference with respect to processing fees
Though the processing charges for personal loans are reduced by banks, you need to pay around 1% to 3% of the loan amount. For gold loans, there is no verification of your income statements, credit rating or guarantor. Hence, the processing charges are nominal. The charges are less than 0.5% and not more than 1.5% of the loan amount, depending on the loan approved.
Difference with respect to tenure of the loan
The period of personal loans is from one year to around three years. But gold loans can be provided even for three months. It is up to you for long you are repaying the gold loan amount.
Difference with respect to risk profile of the applicant
Personal loans are issued to the applicants on the basis of their creditworthiness and report. If the credit report of an applicant is high, then bank will charge lower interest rates. On the contrary, if the credit standing of the applicant is bad, then higher interest rates are charged. So, personal loans are influenced by the risk profile of the applicant. But gold loans do not in deeper detail of the applicant’s income and credit report. It analyzes the purity of the gold and sanctions the loan amount.
Difference with respect to repayment
Personal loans are repaid by fixed EMIs. If there is prepayment to be done, then some banks also levy charges for the same. Gold loans can be prepaid any time without any charges. But one has to pay the interest on time.
Thus, gold loan is better option than personal loans by all aspects.
Recommended Read :
- What is Gold Loan?
- Pros and Cons of Taking Gold Loan
- Is Gold Loan Safe As Compared to Other Personal Loans
- Where to go for Gold Loan Banks Or NBFC?
- Does Change in Gold Price Have Impact On Gold Loan
- What is a Personal Loan?
- How to Get Personal Loan?
- Personal Loan for Women Employees
- What is Personal Loan Eligibility and Benefits?
- Facts to Know Before Applying for Personal Loan
- Beware of Personal Loan Frauds
- Gold Loan vs Personal Loan
- Personal Loans Vs Mortgage Loans
- What is Unsecured Personal Loan?
- How to Get Loan Against Insurance?
- How to Get Unsecured Personal Loans?
- Secured Loan vs Unsecured Loan
- Pros and Cons of Financing Business With Personal Loan
- Risks and Benefits of Combining Personal Loans
- Pros and Cons of Prepayment and Part Payment of Personal Loan
- Loan Against Car
- Who are Private Lenders?
- Processing Fee for Loans