Reasons why gold loans are better than personal loans.

People nowadays looking for money, have plenty of options available with them but one has to be careful while choosing from one of those. Gold loans and personal loans, both have flexible terms and quick disbursal options. Both the loans can help an individual to get through the immediate liquidity crisis and also give competitive interest rates without a pinch on your pockets. Every coin has two sides, the same way both of these loans have their advantages and disadvantages and may prove to be a blessing or financial burden on an individual. The reason one has to be careful while opting for which way to go. But one of them has to be safer than the other, so let us talk about both.

GOLD LOANS:-

It is a secured loan type where you pledge your gold as collateral with the lending institutions (banks/NBFCs). It is considered a good option for short-term money requirements. Following are the key features of a gold loan:-

• Higher loan amount:- Many

• banks or lending institutions provide a personal loan of a maximum of Rs. 40 lacs, whereas the loan amount for gold loans can go up to 5 crores depending on the lending institutions and the amount of gold you pledge as collateral (loan amount is 75-80% of the gold you have pledged).

• No credit score required:- While opting for a gold loan, you need not worry about the CIBIL or credit score with the bank, as banks do not consider the credit history.

• Low rate of interest:- Gold loans Interest rates are generally low as compared to personal loans as the bank has your gold as security. Thus it results in a small hole in your pocket while repaying the loan when compared to a personal loan.

• Repayment flexibility:- gold loan is the only loan type that gives you freedom of choice in tenure and repayment options. The most common repayment options are:- 

1. Regular EMI options

2. Overdraft

3. Bullet repayment

PERSONAL LOANS:-

Personal loans are an unsecured loan type that is ideal for fulfilling urgent and unplanned big expenses. It is opted to fulfill the short-term financial crisis. It also has some key features which may attract you to go for this loan type like:-

• No collateral required

• Quick payment of money

• Minimum paperwork

• Can serve different purposes i.e. not bound to spend money in a restricted field.

Even after so many advantages, a personal loan can prove to be a burden on your pocket. Since it does not require any collateral or security so the Personal loan interest rates are very high, usually ranging from 10-18%. Lending institutions generally lend an amount up to Rs 40 lacs. Whereas when spoken about the gold loan they can provide you a loan amount of Rs 5 crores. A personal loan requires you to have a good CIBIL or credit score with the bank but in the Gold loan, it does not require you to have a credit score as you pledge your gold with the bank as security. A personal loan can take up to 2-7 days for disbursal of cash whereas in gold loan it is as quick as 30 minutes or a maximum a day. Both the loans have just two things in common that is - minimum paperwork and short-term loans.

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