Let’s say you are in urgent need of cash, and you heard that a gold loan and a personal loan are the two main options to get your hands on some cash quickly. But now you are stuck and can’t decide which option should you pick between these two loan options, right? Well, you see, if you knew the nitty-gritty of both these loan options, you’d be able to make the decision in an instant, and that is what we are onto today. Here we will introduce you to the gold loans, and personal loans, what they are, what you’ll need to apply for them, how much you’ll get, what would be the interest rates, and things like that. So yeah, come with us as we literally tell you which one of these loans is a better option for you. Here we go.
Breaking Down Gold Loan and Personal Loan
Gold Loan: Let’s dive into what makes a gold loan different from a personal loan, shall we? When you’re looking at a gold loan, you’re looking at a secured way to get some quick cash. Basically, you take your gold, which could be jewelry, coins, whatever’s gold, and you use it as a guarantee. This kind of loan is a go-to for people who need money fast but maybe don’t have a great credit score or a steady income to show.
Personal Loan: Now, flip the coin, and you’ve got personal loans. These are unsecured, which means you don’t need to put up any of your stuff as collateral. People often pick this option when they need more money than a gold loan can offer, or they wanna spread out the payments over a longer time. But here’s the catch though, since the banks are taking a bigger risk by not having any collateral, they charge you higher interest rates. So, you end up paying more in the long run.
|Required (gold assets)
|Lower (5.88% – 24% p.a.)
|Higher (10.49% – 24% p.a.)
|Shorter (up to 3 years)
|Longer (up to 7 years)
|Up to 75% of gold’s value
|Up to ₹25 Lakhs or more
Key Differences Between Gold Loans And Personal Loans
1. Who Can Get a Gold Loan?
Wanna get a gold loan? Well, all you need is some gold that you own. The cool thing here is, banks aren’t too needy about your job or credit history when it comes to gold loans. This is great news if you’re someone without a regular paycheck or if your credit score isn’t something to brag about. Now, if we talk about personal loans, that’s a different story. They’re pretty strict. You gotta have a good credit score, a steady income, and your financial history should be squeaky clean. Basically, lenders wanna make sure you’re good for the money before they hand it over.
Also See: Muthoot Finance Company
2. What’s the Deal with Interest Rates?
Here’s the deal: gold loans are pretty cheap. We’re talking interest rates starting from as low as 5.88% a year. Why so low? Well, you’re giving the bank your gold as collateral, so they’re not sweating about losing their money. But personal loans? They’re a whole different thing than gold loans. Since there’s no collateral, the banks start the rates at around 10.49% a year. They’re taking a bigger risk, so they charge you more.
3. How Long Do You Have to Pay Back?
Gold loans are like a sprint; they’re quick. You’ve got between 6 months to 3 years to pay it back. Makes sense, right? You give them gold, they give you cash, and you settle up quickly. But personal loans are more like a marathon. You can stretch those payments up to 7 years. This gives you more breathing room, making those monthly payments a bit easier on your wallet.
4. How Much Can You Borrow?
Alright, so when it comes to gold loans, how much you can get your hands on basically depends on how much your gold is worth. Most of the time, lenders are cool with offering about 75% of what your gold is actually worth in the market. Now, if we talk about personal loans, that’s a whole scene in this whole loan amount thing. You see, the amount you can borrow is way more flexible and can go sky-high, even up to ₹25 Lakhs or more. But yeah, it all depends on how good you are with money, your creditworthiness, and how well you can pay back.
5. How Fast Do You Get the Cash?
Gold loans are way, and we mean WAY FASTER than personal loans. You’re looking at getting your loan out the door and into your hands, often within just a few hours. Why so fast? Well, it’s all thanks to the pretty straightforward way they figure out how much your gold is worth and the fact that they don’t ask for a truckload of paperwork. Personal loans, though? They’re more like a slow burn. It can take up to a week for those guys to get sorted. They gotta dig deep into how you handle your cash, your income, and a bunch of other stuff.
6. Paying It Back
Now, let’s chat about paying back what you owe. With gold loans, you’ve got a bunch of different ways to settle up. You can go for one big payment, regular EMIs, or even bullet payments, which is kinda like picking what suits your wallet best. But personal loans? They’re a bit more rigid. You’re looking at paying back in fixed monthly EMIs for the entire time you’ve got the loan, which doesn’t give you a lot of wiggle room.
7. Processing Fees
So, you wanna know about the processing fees for gold loans, right? Here’s the cool part: they’re usually way lower compared to other loans. This is because gold loans are more secure for the bank, less risk, you know? And when things are less risky for the bank, they don’t charge you as much. Now, if we talk about personal loans, that’s a whole different story. The processing fees can hit up to 3% of the loan amount. Why so high, you ask? Well, it’s all about the risk and the extra work the bank has to do for these unsecured loans.
So Which Loan Is Actually Better, A Gold Loan Or A Personal Loan?
Well, the thing is, no one can tell you which loan type is better suited for you because the answer to that question is something that only YOU can answer, nobody else. Let’s say, you have some gold by your side, then without a doubt, you should go for the gold loan option because the tenure is short, and the interest rates are pretty low as well. But, let’s say you don’t have any securities to offer to the bank or the financial institution, then you sure will go for the personal loan options, but keep in mind though, the interest rates are much higher. So yeah, it all boils down to what you have, and what you need, that’s all.
That’ll do it. Now you must be feeling a lot clearer in your head about which path to go down on, right? We hope that today’s post has served you well and actually helped you form a conclusion of your own about gold and personal loans.
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Anantha Nageswaran is the chief editor and writer at TheBusinessBlaze.com. He specialises in business, finance, insurance, loan investment topics. With a strong background in business-finance and a passion for demystifying complex concepts, Anantha brings a unique perspective to his writing.