5 Reasons Why Gold Loans Are Better Than Personal Loans
At times, you will require access to finances and choose to apply for a loan. Mostly, people opt for personal loans since they do not require any collateral and are granted in a relatively short amount of time. However, another great option to get access to money quickly and easily is through gold loans.
Banks promote personal loans as their main product, but it is important to know that their interest rates range from 12% to 28%. While they are easy to apply for and get approved, personal loans have their disadvantages. Gold loans, on the other hand, have multiple benefits such as lower interest rates, flexible repayment options and more.
What Are Gold Loans
Lenders provide customers with loans that are secured by gold. Typically, a percentage of the gold’s value is provided as the loan sum. The maximum credit amount that may be obtained depends on the amount of gold being pledged and other factors.
Borrowers must repay the gold loan amount in instalments within the set time frame to get their gold items back from the bank or financial institution. The repayment can be made monthly or according to other predetermined repayment schedules, depending on the terms of the gold loan.
What Are Personal Loans
A personal loan is an unsecured loan, and this means that the borrower does not have to pledge any of their assets as security. Personal loans allow people to borrow money for multiple purposes. For example, you can use a personal loan to pay for wedding expenses, medical emergencies or house upgrades. Banks and other financial institutions provide personal loans, and the money you borrow from the lender must be repaid in EMIs within a fixed period and with interest. Some banks may even have additional charges or fees to apply for personal loans.
5 Reasons Gold Loans Are Better Than Personal Loans
When comparing gold loans and personal loans, there are extra benefits that gold loans offer. These are 5 advantages of applying for gold loans:
1. Easier Eligibility Requirements
For personal loans, borrowers are not required to needed to provide assets as security. However, there are many requirements that borrowers have to meet to be eligible to apply. For example, they must be of a certain age, earn a certain amount of money and have a specific CIBIL score to be considered eligible to apply for a personal loan. For gold loans, many of these requirements are not required and the gold loan is granted based on the gold being given as security.
2. Lower Processing Fees
For personal loans, lenders are required to carefully review the applicant’s income-related documents. As a result, they charge a small processing fee for personal loans. These personal loan processing fees can be from 0.5% to 1% of the loan amount. For gold loans, gold holdings are used as security. Therefore, people applying for gold loans do not need to produce papers related to their income. Because of this, processing fees are not included in this calculation.
3. Less Time Required For Approval
When a borrower applies for a personal loan through a bank or an NBFC, the lender has to verify the borrower’s documents and assess their ability to repay the loan by checking their CIBIL score and other details since no security is provided. This process takes time and may cause the loan approval and disbursement process to be delayed. By contrast, the gold loan borrowing process is straightforward. The borrower pledges their gold assets as security and the gold is inspected. If approved, then the gold loan is granted to the borrower within one or two days.
4. Flexible Repayment Options
Gold loans provide more flexible options for repayment than personal loans. This flexibility in repayments is because gold loans are secured loans. Gold loan borrowers may choose from a variety of repayment alternatives. Borrowers may repay gold loans in EMIs. Alternatively, they may also pay the interest up front and repay the principal throughout their loan term, or pay the principal and interest in one single sum at the end of the term. Lenders provide multiple options to repay gold loans depending on your financial situation.
5. Lower Interest Rate
Gold loans offer lower interest rates compared to the interest rates of personal loans. A personal loan has interest rates of 16% to 22%, while the interest rates for gold loans are between 11 and 13 per cent. With a gold loan, a borrower will end up paying less than with a personal loan. With lower interest rates for gold loans, borrowers can save more of their money while also being able to get access to much-needed funds.
There are many similarities between gold loans and personal loans. Both types of loans allow people to borrow sums of money for various purposes. Compared to a gold loan, a personal loan allows larger borrowing amounts and longer terms. However, a gold loan offers better interest rates, fewer additional fees and minimum eligibility requirements.
For many people in India, gold remains one of the most popular investment options. Additionally, the relatively consistent gold prices provide investors with many opportunities. When there is a situation that places people in financial need, taking a gold loan helps people get access to funds while giving them the chance to save more of their money. Borrowing money against gold assets is a wiser investment than borrowing money personally.
For more articles on the advantages of applying for gold loans, visit Piramal Finance and receive more financial information and guidance!
Also Read: How to Use a Short-Term Loan during a Financial Emergency?
More articles for you
Things You Should Consider Before Applying for a Gold Loan
Can You Get an Education or Personal Loan For Online Courses
Buy Home Theatre at Best Prices in 2022
Does a Gold Loan Increase a Credit Score Fast?
Know the meaning of the Moratorium Period in a Home Loan
Features of Loans for Chartered Accountants in India
Online calculator for calculating Public Provident Fund (PPF) maturity amount
Top Benefits of Funding This Festive Season With a Personal Loan
Top Reasons Why You Should Pay The Home Loan Last If You Have Multiple Loans