Gold loan or personal loan: Which one should you choose?

Gold loan or personal loan: Which one should you choose?

As per RBI guidelines, up to 75 per cent of the value of the gold in the jewellery can be given as a loan. It is done after checking the purity of the metal and then ascertaining the market prices of gold.

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New Delhi: Gold loan is a scheme where the applicant can avail loan by pledging gold ornaments including gold coins sold by banks. The loan amount depends on the value of gold pledged. This yellow metal is considered as a safe haven among Indians. As per Reserve Bank of India (RBI) guidelines, up to 75 per cent of the value of the gold in the jewellery can be given as a loan. It is done after checking the purity of the metal and then ascertaining the market prices of gold.

Unlike a personal loan, gold loan is considered as a secured form of loan for both lenders and borrowers. Documents needed for this loan is also very less and it is issued in just a few minutes, which makes it a better choice than personal loan.

Let us understand in detail why the gold loan is better than the personal loan- 

1. Interest rates– The interest rate on the gold loan starts from 9.6 per cent onwards while for a personal loan interest rate is more than 11 per cent. One important point to note here is that the gold loan can be availed for an amount as low as Rs 1,000 whereas the minimum loan amount in the personal loan is Rs 5,000.

Gold Loan:

Gold loan
Personal Loan:
personal loan

2. Doesn’t affect credit score much– Since the gold loan is a secured loan, there is no requirement of good credit history to avail it. It is disbursed quickly. However, to avail personal loan, applicant’s personal loan request is evaluated and the amount, interest rate, tenure etc., are set according to his/her credit score and repayment capacity. In case of a low credit score, the lender might reject the applicant’s loan request. The guidelines to avail personal loan vary from bank to bank but the eligibility criteria to avail this is quite strict. The applicant must have a good credit history. Many banks charge a prepayment penalty on prepayment of personal loans

3. Less documentation and higher repayment– Unlike other forms of loan, required documents for gold loan are basic KYC documents like identity proof (passport, driving license, Aadhaar card, ration card etc) and address proof (electricity bill, telephone bill or other utility bills). While personal loan has more detailed documentation process involving identification proof, address proof, income proof, bank statement.

4. Loan Disbursal time– Since gold loan has minimum documentation process, therefore the loan disbursal time can be as short as 5 minutes. Whereas, in case of the personal loan, it takes at least 48 hours for loan disbursal.

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