Gold Loan vs Personal Loan: A comprehensive guide
Synopsis:Looking to apply for an loan? Find out more about personal loan and gold loans which is the better option and what makes them different in regards to collateral needed as well as interest rates and more.
The thing that the past few months have revealed is that living is a constant source of uncertainty. It is possible to be thrown a curveball in the midst of your preparations and you could require cash assistance in a hurry. There could be an emergency medical situation, require funds to run your business or you’ll need to do some major repairs at home or pay for your child’s school fees or want to take advantage of an opportunity to travel that arises.
Personal loans and Gold loans are two options that can fulfill these requirements. To make the most of a gold personal loan or loan it is crucial to be aware of the differences between these two options so that you make the correct decision for your specific requirements. Let’s learn the nature of these loans before we get into the personal loan vs. gold loan debate.
What exactly is a loan in gold?
Like the name implies, the term “gold loan” refers to the loan you get against the gold you own (jewellery bars, jewelry and coins). To be eligible for these loans, you will need to give you gold as collateral. You will get a loan amount that is based on the worth that your precious metal. Because you must make a pledge of your gold, this makes this an unsecured loan. Most lenders will offer loans for gold up at 75% to 85% of gold’s worth, however, it can vary between lenders.
When you have this loan, you are able to make use of it to meet all of your requirements and pay back the lender in accordance with the terms you previously agreed to. After you have paid back your loan will receive the gold asset back by the lending institution. You can obtain this kind of loan through banks and NBFCs.
Which is the definition of a personal loan?
Personal loans don’t require collateral, which makes them unsecure loans. In this case, the loan is distributed according to factors like how much you earn, your creditworthiness, any other loans or loans, etc. The lender considers these aspects and then determines the amount of loan for which you’re eligible. Because banks don’t have waiting for your to submit some collateral the personal loan can be easier to obtain. All you have to provide is the basic KYC documents, proof of income as well as proof of income. And you’re set.
In addition, you can obtain a personal loan from the banks, or NBFCs. In reality they have simplified the process by making the entire process electronic. All you need to do is make an online application and provide a few supporting documents. Once the loan is approved, it will be deposited into your bank account in just a few days.
Differentialities between gold loans and personal loans
To know which one is the best option – a personal loan or a gold loan To help you decide which one is best – a personal loan or a gold loan To help you decide,here are the key distinctions between these two loan options that will aid you in making an informed decision.
1. Collateral
As we have explained, a the gold loans are secured loan in which you promise your gold assets as collateral. The gold is used as security. In contrast the personal loans are secured loans that don’t require collateral. The loan is according to certain eligibility requirements that include factors like income of the borrower as well as credit history, previous debts and loans, etc.
2. Rate of interest
Because gold loans come with collateral, their interest rates are usually slightly lower than personal loans because of less risk to capital. The interest rates for gold loans can vary from 9% up or 30% while for personal loans, they can range between 10.49 percent to 25 percent. In both cases the rate of interest applicable will depend on the personal profile of the client.
3. The loan amount
When you borrow gold, your lending eligibility is determined by the purity and weight. The majority of lenders provide 75%-80 percent of the market value of gold in order to accommodate any fluctuation. Personal loans are granted according to the needs of the borrower and creditworthiness. IDFC personal loans offered by FIRST Bank allow you to apply for a loan amount ranging from one and 20,000 Rs. crore.
4. Tenure
Gold loans are generally looked at for shorter terms ranging between one day and up to 36 months. Personal loans are more flexible when they have longer durations, typically from three months to sixty months.
5. Documentation
In order to get any credit, the borrowers need be in compliance with KYC guidelines and provide documents like a the PAN number, proof of ID and proof of address. If they are taking out a gold-based loan, borrowers must also be able to prove possession of the assets. If you are looking for personal loan, in addition to your KYC document, customers just require a bank statement as well as proof of income.
6. Processing time
A gold loan will only be released after the lender examines the gold and determines an appraisal. It could take several days. However personal loan applications are done electronically. It is possible to upload your documents and receive approval within minutes, and the funds will be in your account in 24-48 hours.
7. Charges and fees
Processing charges and service fees are a part of every credit item. If you take out a gold loan, you might also be required to pay valuation costs. The list of fees is standard for personal loans. In accordance with the loan amount the lender could require you to pay insurance costs (in the case of loan amounts).
Conclusion
Although gold loans are the option of a short-term, stop-gap plan Personal loans are much more flexible and can be used to meet a variety of financial requirements. Additionally, they offer greater eligibility and longer durations getting or managing your personal loan can be completely hassle-free. IDFC FIRST Bank provides an easy and paperless application procedure that will ensure you get the appropriate financial assistance at the time you require it, as well as at affordable prices. It is also possible to apply for a credit on the loan if you require it.
Why put off? Make your goals and dreams into reality by applying for an IDFC First Bank personal loans!
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The content is generic in nature and are intended for solely informational purposes. This information is not intended to substitute for advice specific to your particular situation. This information may be subject to change or completion, revision or amendment, and could change substantially. This information does not intend to be distributed or use by anyone in any country where such distribution or use is in violation of laws or regulations or expose IDFC FIRST Bank, or any of its subsidiaries to licensing or registration conditions. IDFC FIRST Bank cannot be liable for any direct or indirect damage or loss that the user may incur by making financial decisions that are based on the content and other information provided. You should consult with your financial advisor prior to taking any decision regarding your finances.
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