1. Guarantees and processing time
In the case of personal loans, borrowers are not required to provide collateral; nevertheless, a gold loan is approved with gold assets as collateral. When people have financial problems, they apply for a gold loan or a personal loan because lenders can process them quickly. They must, however, present the relevant documents with the loan application, such as proof of income, proof of address, etc. Although a time-consuming process in itself, gold loans are more efficient in disbursing money than personal loans.
2. Cost of getting a loan
Banks do not offer any collateral when it comes to personal loans. The loan applicant’s income verification documents are then reviewed by the lending institutions. As a result, they charge a small processing fee for personal loans. Personal loan processing fees typically range from 0.5% to 1% of the loan amount.
In the case of a gold loan, borrowers do not need to show proof of income documents when applying, as they are using their gold holdings as collateral. Processing fees are not included in this calculation.
3. Duration of the loan
When the lender, be it banks or NBFC, receives personal loan applications, they assess the income of the supporting documents in the absence of collateral. They also perform a thorough due investigation to ensure that the applicant has sufficient repayment capabilities. This is a time-consuming process and can delay the loan.
Whereas, in gold loan, the procedure is simple. Borrowers sign various forms and present their gold valuables as collateral. Then the loan amount is approved.
4. Flexible repayment options
A personal loan or gold loan will allow the borrower to repay their loan through EMI, allowing them to escape most repayment restrictions. However, repayment choices for gold loans are more flexible than those for personal loans. They are more accommodating to customers since secured loans guarantee on-time payments. Gold loan borrowers can choose from a variety of repayment methods.
To repay a loan in gold, the borrower can simply choose the usual EMI option. They can also choose to pay interest over the life of the loan and pay back the principal at the end of the term. Borrowers can choose to pay the interest and loan amount in one sum at the end of the term. Gold loans offer solutions to increase your ability to repay, giving you the best chance of repaying your loan.
5. Low interest rate
When comparing gold loans to personal loans, it becomes clear that gold loans have cheaper interest rates. A gold loan is sanctioned at interest rates ranging from 11-13%, but a personal loan is sanctioned at rates ranging from 16-22%.
For a borrower, this means that taking out a gold loan is cheaper than taking out a personal loan. Even though they are built for the same amount of money, this makes repaying gold loans a little easier than repaying personal loans.