Gold loan vs Personal loan – Here’s The Complete Rundown

Gold loan vs Personal loan - Here's The Complete Rundown

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Here’s a kicker of a fact. India has almost 20000 tonnes of gold in its households. This may be in the form of ornaments or bars or anything else. More so this data is of 2015. By now this number has surely gone up by a couple of more tonnes. No wonder when it comes to gold consumption, India is right there at the top. But there is a flaw. Indians have a lot of gold, yet we do not understand its full potential, and we do not use it to our advantage. On occasions such as Akshaya Tritiya or Dhanteras gold buying goes up significantly. This is because it is surely a good investment, but in reality, this is not utilised to its potential. Majority of the gold just lies at homes. People do not want gold as security. This is mainly due to sentimental reasons. Furthermore, the majority of gold is not properly monetised in India.

What if we told you there’s a way to not sell gold for liquidity? The secret is a gold loan. Pawnbrokers and moneylenders have made it a viable business. However, in recent years many veritable financial establishments have started letting out a gold loan. In India, this trend is still in its nascent stages, and only a few people have utilised the benefits this system offers. Most would take a personal loan than use their gold as security during an emergency. A personal loan and a gold loan differ significantly even though the functioning is quite similar.

Let us look at how these two loans work out. We will also see how they differ.

The traditional loan – Personal loan

  • In India, when someone mentions a loan, it is mostly a personal loan. This is because everyone mostly applies to some sort of personal loan.
  • These loans are mostly taken to fulfil some sort of need. It may be a dream car or vacation. it could also be for medical expenses.
  • These loans are quite readily available. But beware! Personal loans without proper planning and feasibility checks can be a financial disaster.
  • Getting this loan approved requires you to show a valid proof of income. Even then there are chances that your loan may not get approved as the income may be low for the lender to consider your proposal.
  • Credit score plays a major part in getting approval. The amount you finally get approved depends on this.
  • The repayment schedule, as far as personal loans are in consideration, it is quite rigid.
  • Before applying for a personal question, you should always ask yourself these questions:
  • Is the job you have steady and stable?
  • Is your present credit score good enough to get approval?
  • Do you not have any form of collateral that you can fall back upon?
  • Are all the documents you require in proper order?

Only when you are certain that the answer in every case is YES should you consider a personal loan.

Gold loan? What’s different about them?

As the name suggests, a gold loan is a money in exchange for gold.

  • Gold loans are here to save the day. Gold prices are currently skyrocketing. Hence they offer a lucrative chance of good returns if one applies for a loan.
  • It is a secured form of a loan with much faster approval as compared to normal loans.
  • The banks do not bother about your CIBIL score while approving a gold loan. This is because the gold you deposit secures their investment.
  • Flexible repayment schedules are one of the hot-selling points of a gold loan. You are often provided with customised repayment schedules of your choice.
  • And the most striking feature of a gold loan interest rate is often much lower than that of a normal loan.
  • In many ways, a gold loan provides much more flexibility and freedom over a normal loan any day.
  • To sum up, here are the reasons why a gold loan is way better than a normal one:
    • No credit history required
    • almost instantaneous approval
    • much lower interest rates
    • very simple documentation required
    • They also offer one chance to improve their CIBIL score.

Now we have discussed both the forms of loans quite extensively. It should not be very difficult to understand why a gold loan is far more lucrative than a personal loan. More so when one is in need of urgent cash due to some emergency. With a vastly quicker turn around time and various checks in place to help you repay the loan safely, gold loans are surely the best. The icing on the cake is the very low-interest rate. “Another option you can consider is cash against gold. Gold Loan lends 75% at LTV whereas You can also avail Cash for Gold which would be 99% around the actual value.”

Personal loan interest rates are comparatively higher. Gold loans outweigh a personal loan quite handily. So go ahead and make a choice based on the facts and do not be afraid to pledge your gold. It is a much better option and offers far better peace of mind as far as one considers the burden of repayment.

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