Author’s Name: Priyank Kothari, Director of Arvog
Financial needs can arise at any time—some expected, others sudden. To manage these situations, many people turn to loans. Two of the most common options are gold loans and personal loans. Choosing the right one depends on your needs, repayment ability, and loan terms. Let’s take a closer look at both to help making an informed choice.
The Gold Loan
A gold loan is one of the easiest and most popular types of loans in India. In this arrangement, borrower gets money by pledging the gold ornaments as security. The value of the loan depends on the current market price of gold per gram, which is used to determine how much money you can get.
The lender evaluates gold and offers the borrower a loan amount that 75% of its value. This percentage is called the Loan-to-Value (LTV) ratio, and is decided by the regulator. Once the borrower repays the loan and interest, the pledged gold is returned in the same condition.
Why Gold Loans Are Popular
Here are some reasons why gold loans are widely preferred:
* Easy Application
The borrower can apply for a gold loan online in just a few clicks. The process is smooth and user-friendly.
* Minimal Documentation
Apart from basic ID proof, gold loans require very little paperwork.
* Quick Approval
Since the loan is backed by collateral (gold), lenders process applications faster than unsecured loans.
* Instant Disbursal
After the gold is evaluated and pledged, the loan amount is credited into the borrowers bank account—often on the same day or within a few hours.
* No Need for a Credit Score
The borrowers credit score doesn’t affect his eligibility. The value of gold determines the loan amount.
* Lower Interest Rates
Gold loans usually have lower interest rates than personal loans, because they are secured loans.
* Flexible Repayment Options
The borrower can choose to pay in EMIs, in one lump sum, or at the end of the loan period—whichever suits his financial situation.
* Gold is Returned Safely
Once the loan is fully repaid, the pledged gold is returned in the same condition. The borrower can even use it again for a future loan if needed.
* The Personal Loan
A personal loan is an unsecured loan, meaning the borrower don’t have to provide any security or collateral. The loan is granted based on income, credit score, and other financial details.
Since there’s no asset backing the loan, the interest rates tend to be higher. However, personal loans are quite flexible in terms of usage and repayment.
Key Features of Personal Loans
* No Collateral Needed
The borrower doesn’t have to pledge any assets to get a personal loan.
* Can Be Used for Anything
Whether it’s a medical emergency, home renovation, vacation, or wedding—personal loans can be used for almost any purpose.
* Longer Repayment Periods
Personal loans often offer longer tenures for repayment, which can help ease the monthly burden.
* Higher Loan Amounts Possible
If the borrower has a good financial profile and credit history, he may be eligible for a higher loan amount to cover bigger expenses.
Why Gold Loan Could Be the Better Option
While both gold loans and personal loans have their benefits, gold loans have a clear edge in many situations—especially if you need money urgently or have a low credit score. The application process is quick, the interest rates are lower, and the valuable asset remains safe and intact.
Gold loans are especially useful when an immediate access to funds is required and the credit score isn’t ideal.
Make an Informed Decision
Gold loans are a reliable and quick solution during financial emergencies or major life events. However, whichever loan is selected, it’s important to read the Key Facts Statement provided by the lender. This document includes important information like interest rates, repayment terms, and other charges. Going through it carefully ensures transparency and avoids surprises later.
In conclusion, if one is looking for a low-cost, hassle-free, and fast way to get funds, a gold loan could be the smarter choice.
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