All that glitters might not be gold. But if you possess something that glitters and it is gold consider your future secured. Because this glittering metal has been considered one of the most secured investments across the globe. In case you lack liquid cash at a crucial juncture of your life, just take your gold to a bank or any NBFC (Non-Banking Financial Company), pledge it, and bring back home the much-required cash. Such is the power of gold.
In this article, we discuss everything you must know about gold loans and why it is better than a personal loan.
Gold Loan VS Personal Loan
First things first. Let us understand the difference between a gold loan and personal loan before comparing them.
What Is A Gold Loan?
A loan that is granted to an individual on gold jewelry that is submitted as security with the banks or NBFCs is referred to as a gold loan. The amount granted as a loan depends on the value and quantity of Gold that is submitted. This is the best option if you are looking for quick and short-term loans. Gold loans can be paid off and closed at any time.
What Is A Personal Loan?
When a bank grants you a loan without the requirement of collateral it is referred to as a personal loan. The loan is granted based on the income that an individual earns every month. Your loan eligibility depends on whether you are a salaried employee or a self-employed person who has a steady income. A fixed EMI for a fixed period of time is used for paying off a personal loan. A loan EMI calculator clearly tells you the amount you are required to pay each month.
|Gold is submitted as collateral||Though collateral is not required you need to have enough proof showing you have a steady monthly income.|
|Bank considers the value and quantity of gold to decide on the amount of loan||The loan is granted by the bank based on an individual’s income eligibility|
|Anyone who has their own jewelry or other items of gold can be granted this loan||A loan is granted only to self-employed persons or salaried employees.|
|The rate of interest on loans is less compared to personal loans. The loan granted by most of the banks usually has a maximum interest of 12%-15%.||The interest rates on Personal loans could be anywhere between 18% and 28%. This high rate is due to the fact that there is no collateral.|
|A guarantor is not required||A guarantor needs to be arranged to get a personal loan|
|No processing fee or a fee of less than 1% on the loan amount||Requires a processing fee. It is usually 2-3% of the total loan amount.|
|Most of the banks do not charge a pre-payment fee.||Around 2%-3% of the loan amount needs to be paid as charges for pre-paying the loan.|
|Processing time is less and a minimum amount of documents are required.||You need to submit several documents to prove your income eligibility. This takes a long time for processing|
|The loan is sanctioned within a few hours.||It could take anywhere between 3 days and a few weeks before the bank sanctions a personal loan.|
|The maximum repayment tenure for loans is 12 months||The repayment tenure for personal loans is between 1-5 years.|
Compared to personal loans gold loans get sanctioned easily from the banks and requires a lesser amount of paperwork and processing time. The interest rates are much less and you don’t have to worry about paying a processing fee most of the time. Gold loans do not carry a pre-payment charge, so you can close it any time you wish to. It is also one of the quickest ways to get a loan especially if you have an urgent requirement for money. Considering all these factors applying for a gold loan is definitely a better option than a personal loan.
This blog is maintained by the Finaura team. Finaura is a solution that will help you find the best gold loan solution from gold loan company nearest to you. If you have any queries please feel free to contact us. Call us on +91 484 2388285 or email us at [email protected]