Gold loans and personal loans are two types of loans that are available to borrowers in India. Here are some of the differences between the two:
Collateral: A gold loan is a secured loan that is secured against gold jewellery, coins or bars. The amount of loan that can be availed depends on the value of gold pledged as collateral. On the other hand, a personal loan is an unsecured loan that does not require any collateral.
Interest Rates: The interest rates on gold loans are generally lower than personal loans, as they are secured loans. The interest rate on a personal loan is higher than that of a gold loan, as the lender takes a higher risk by providing an unsecured loan.
Loan Amount: The loan amount for a gold loan depends on the value of gold pledged as collateral. The loan amount for a personal loan is determined based on the borrower’s credit score, income, and repayment capacity.
Loan Tenure: Gold loans generally have a shorter tenure compared to personal loans. Gold loans are usually for a maximum period of one year, while personal loans can have a tenure ranging from one to five years.
Processing Time: Gold loans are processed faster than personal loans as the valuation of gold takes less time than assessing the borrower’s creditworthiness.
Credit Score: A good credit score is not required to avail a gold loan as it is a secured loan. However, a good credit score is required to avail a personal loan, as it is an unsecured loan.
In conclusion, gold loans are a good option if you need a quick loan and have gold to pledge as collateral. Personal loans are a good option if you do not have any collateral to pledge and have a good credit score. It is important to compare the interest rates, fees, and other terms and conditions of both types of loans before making a decision.