For Indian families, gold is one of the most popular and safest means of investing and saving money for future. Due to this attachment, gold loans have gradually become a good alternative to personal loans for Indians. But personal loans also have their share of advantages and this is why it often becomes difficult for people to decide which will be more useful for them at the time of need. If you are having the same confusion, go through these factors to decide whether you want to go for personal loan or gold loan:
Eligibility Criteria
You can apply for a gold loan only if you have gold in form of coins or ornaments. You just have to pledge for the loan against the gold that you are mortgaging. On contrary, you will be eligible for getting personal loan if you are a salaried employee with a minimum net monthly income of Rs.15000. However, this criterion may vary. Read more about personal loan eligibility to take personal loan at low interest rates
Loan Amount
Whether it is loan for gold or personal loan, the amount differs for both. In case of personal loan, you can start from a minimum of 15,000 and can go up to a maximum of 15,00,000 based on your requirements. However, in case of gold loans, you have to pledge an amount which is 10-15% lesser than the value of the gold that you are mortgaging.
Credit Check Requirement
Personal loan being an unsecured loan needs proper credit check before its approval. If there is any discrepancy or the CIBIL credit score is low, there are high chances that your application will get rejected. On the other hand, gold loans being highly secured don’t need any credit checks and your bad credit score will no way affect its approval.
Process of Approval
In case of personal loans, you will get to know your eligibility status instantly, but the complex paperwork might take up to 24 to 48 hours or sometimes more. To complete the formalities you need to provide ID, residence, income and work proof. Conversely, the approval process for gold loan is quite simple and the paperwork is minimal requiring only ID and residence proof. You might expect to get the amount within couple of hours.
Mortgaging Requirement
If you have gold in your home, then converting that into gold loan is a really cool option. As you are mortgaging your gold, there is no requirement for a guarantor. But if you want to get a loan without any security deposit then personal loan is the right one to go for. You just need to state the purpose and verify your income proof for its approval.
Credit Limitations
While applying for personal loan and loan for gold you need to check out the credit limitations for each of them and then choose the right one based on your credit requirement. Since gold prices are not stable, how much loan you will get entirely depends on the current gold rate. Moreover, you will only get a loan amount of up to 75% of the total value of your mortgaged gold. But there is no such criteria for personal loans. If you are eligible bank will credit any amount that falls within the range that it is offering to the applicants.
Rate of Interest
Gold loans score higher than the personal loans in terms of interest rate as the latter comes with a high amount of interest that often ranges between 14%-20% or higher. But for gold loans, the rate of interest is limited up to 12%-15% based on the value of gold. You can even negotiate interest rate when your gold is hallmarked or the value is more.
Repayment Options
The repayment options for personal loan and loan for gold are different. While in gold loans, you have the flexibility to pay the interest during your tenure and principal amount at the end, personal loans require strict on time EMI payments including principal amount and interest. Also, personal loans come with a repayment tenure of 1-5 years whereas gold loans are offered for a tenure of 1 year.
Charges & Penalties
Be it loan for gold or personal loan, you must know about the charges and penalties in advance. Personal loans come with processing fees and prepayment penalties for foreclosures. Though it varies from one bank to another, the prepayment penalty generally ranges between 1%-2% of the principal amount that is outstanding. In case of gold loans, you
So, keep in mind these factors while choosing between personal loan or gold loan. Since both the loans have their own pros and cons, it is up to your convenience which one to choose and which not. Think wisely and consider the best option for yourself.
