Gold loan vs personal loan: Important Differences

Opting for a loan is the best option when you are in urgent need of funds. Nowadays, you can opt for different types of loans depending on why you need the amount. But if you are looking for loans with no restriction on their use, gold loans and personal loans are extremely popular. In this article, we will compare a gold loan vs personal loan and help you pick the one that’s the best for you.

Interest Rate

When you are applying for a loan, the interest rate is a key consideration. If you compare the gold loan vs personal loan interest rates, you will realize that both of them offer attractive interest rates. Gold loans come with interest rates of up to 24% per annum.

Meanwhile, personal loans can have interest rates of around 11% to 15%. But the interest rate on personal loans will be influenced by the eligibility and creditworthiness of the borrower.

Documentation

You will have to submit basic documents like identity proof, address proof, ownership proof, and other documents according to the lender’s requirements for personal loans. Some common documents required include a PAN card, Aadhaar card, Voter’s ID, driver’s license, income proof, and bank statements.

But gold loans are a secured form of financing with minimal documentation requirements. You can get gold loans without submitting your income proof because you will have to provide gold assets as collateral.

Tenure

The tenure of personal loans can range from one to five years. But you will usually find a gold loan with a tenure of three months to three years.

If you are looking for a longer tenure, personal loans are your best option. The long tenure of a personal loan ensures that the borrower can easily repay it. The flexible tenure also ensures that borrowers can maintain a good credit score and manage their expenses well.

Processing Speed

Gold loans might have a long processing time. Borrowers will have to submit their KYC documents and hand over their gold assets before getting a gold loan. The loan gets discharged only when the lender completes the valuation.

But you can easily get an instant personal loan. You will have to submit the application online and provide the required documents, and the loan will get approved instantly. It will ensure that the funds reflect in your account within a few hours.

Gold Loan Vs Personal Loan: What Should You Choose?

Gold loans and personal loans have their own advantages and disadvantages. You should weigh the two options against each other before making your choice. But remember that you will need gold assets to get a loan against it, while you don’t need any collateral for personal loans.