Whenever you need or want a loan there are multiple types of loans that you can choose from. However, two of the most common forms of loans are regular loans and gold loans. While to some extend we are all familiar with the regular loans and have a brief understanding of gold loans since most of us invest in gold and regularly research things like gold price today Bharuch or for any other place. However, this article is going to dive deep and explain to you in detail the difference between these two forms of loan so you may choose what’s best for you.
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Secured vs unsecured
A gold loan is a secured loan where the borrower needs to offer his/her gold articles like gold jewellery or coins as collateral to the lender. The lender in this case is usually an NBFC or bank. The lender will hold on to the gold until you pay back the loan amount along with interest.
A personal loan, however, is an unsecured loan wherein the borrower does not have to offer any security or guarantee to the lender. This makes it a much riskier proposition for the lender, which is why banks and other financial institutions charge higher interest rates on personal loans.
Gold loans are the way to go if you have a financial emergency and need money in a hurry. You can get a gold loan at almost any time of the day, without much documentation and have the money credited to your account within minutes. On the other hand, a personal loan requires more documentation and takes longer to process and disburse, in most cases.
Gold loans are short-term loans. You can borrow up to 60% of the value of the gold you pledge and the loan tenure is usually up to 12 months. If you need a loan for a longer period, then a personal loan is better suited for your needs as it offers a much longer repayment period of up to 5 years.
Another thing to keep in mind is that with a gold loan there is always an upper limit on how much you can borrow based on the value of your gold jewellery or coins. If you want to borrow more than this amount, then you should opt for a personal loan.
Personal loans have a lower interest rate and higher loan amounts. The interest rates are fixed at around 11%. However, with gold loans, the interest rate varies from lender to lender and could go up to 24% in some cases.
Personal loans can be processed quickly. A bank needs to verify your documents and check your credit score, which takes a couple of days. But if all the documents are in order, the loan amount can be disbursed on the same day.
Gold loans, however, need the gold to be physically moved to a bank branch or the nearest collection centre. The gold will then be appraised and evaluated by a third party valuer before the money is credited to your account. This process can take anywhere from two to five days, depending on where you live.
Which One To Choose?
In a bid to make life easier for borrowers, financial institutions have introduced several loan options, one such option being a personal loan. This is an unsecured type of loan that can be used for multiple reasons and does not require any collateral or security. People often take such loans in order to fulfil their dreams without having the need for submitting any kind of security for it.
However, if we talk about the times of financial crisis when we need urgent funds, a gold loan is considered to be a more lucrative option since it is quick and easy to avail. Moreover, in this age of digitisation, borrowers can now easily apply for and avail of a gold loan online through a hassle-free process. The entire process is almost as easy and smooth as looking up gold price today Sri Ganganagar or Ahmedabad and then buying digital gold online. You can visit Khatabook to understand digital gold in detail.