Personal Loan Or Gold Loan – How To Choose Between The TwoEstimated reading time: 3 minutes

Personal Loan Or Gold Loan – How To Choose Between The Two

Posted on Tuesday, November 21st, 2017 | By IndusInd Bank

There are times when you may have to arrange a certain sum of money urgently. In such emergency situations, you may not have the required amount of money at your disposal, and the next paycheque might not be around the corner. For such urgent situations, certain loan products are designed to give you just the financial boost you require to meet those unforeseen expenses. Personal loans and gold loans are two of the most popular loan products.
While both of them efficiently serve the purpose of making funds accessible quickly to applicants, they have their distinct appeal concerning the requirements they cater to. Choosing between these options depends on your requirements. The following factors may help you opt for the kind of loan that you are more comfortable with –

Gold Loan

A gold loan is a short-term loan given to you against the security of your gold ornaments. It helps you raise funds by depositing your gold with the bank instead of letting it lie idle in a locker. The following advantages make it an attractive scheme:

  • Easy paperwork – Simple documents like ID proof and address proof are sufficient to avail gold loans. Unlike unsecured loans, there is no requirement to produce income statements or credit scores to determine creditworthiness.
  • Quick approval – A loan backed by security is reassuring to bankers, which increases the chances of your application being approved. Gold is a good security which enables your request to be approved at the earliest.
  • Low interest rates – Ranging between 13-14%, the interest rates charged on gold loans is markedly less than other unsecured loans.
  • Quick processing time – This is ideal for immediate cash requirements since funds are disbursed within hours.
  • Raise substantial funds – You may avail up to 60% of the value of your gold ornaments as loan.
  • Low cost – A nominal processing fee of 1% and the option of pre-payment without any charges make availing a gold loan a significantly cheaper option.

Personal Loan

Personal loans are unsecured loans which do not require you to deposit any collateral to avail funds. Not only do these loans allow you to raise substantial funds to meet your requirements like secured loans, they also come packed with the following benefits:

    • Flexible tenure – You may choose the duration over which you wish to repay the loan amount according to your resources. By subscribing to an EMI scheme that suits you, you may plan your resources optimally over that period of time. Loan tenure in Personal Loan normally ranges between 12-60 months.
    • No collateral – To avail a personal loan, you need not provide the bank with any kind of security / collateral, . You are also not required to provide any guarantor.

With a good credit score, it is quite easy to avail a personal loan at a low cost and favourable interest rates. Compared to a gold loan, the application process and disbursal of funds do take a bit longer when it comes to personal loans due to the nature of the loan being unsecured and given purely based on income documents and credit history.
Given these factors, choosing between these products depends entirely on individual requirements and the convenience of transactions associated with them.

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