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5 Reasons Why Gold Loan Is Better Than Personal Loans
Everyone requires financial aid at some point in their lives, and there's no shame in looking into lending choices. However, there are other borrowing choices available, and you may be having difficulty choosing one.
Organized institutions such as banks and NBFCs have worked on improving the way the credit sector operates since the formalisation of the lending industry. At the same time, the Indian public is beginning to comprehend the enormous potential that gold loans may provide. As a result, gold loans have become increasingly popular in comparison to personal loans.
Advantages of the Gold Loan over a Personal Loan
Many experts acclaim the advantages of a gold loan over a personal loan. Borrowers who want to satisfy any form of personal requirements, such as wedding expenditures or purchases, can get a personal loan or a gold loan without any Credit score.
1. Collaterals and Processing Time
In the case of personal loans, borrowers are not required to provide any collateral; nevertheless, a gold loan is approved with gold holdings as collateral. When people are in financial problems, they will apply for a gold loan or a personal loan since lenders can process them quickly. They must, however, present the relevant papers with the loan application, such as proof of income, evidence of domicile, and so on. While this is a time-consuming process in and of itself, gold loans are more efficient at disbursing cash than personal loans.
2. Cost of Raising Loan
Banks are not offered with any security when it comes to personal loans. The loan applicant's income verification documents are next scrutinised by the lending institutions. As a result, they charge small processing costs for personal loans. Processing costs for personal loans typically vary from 0.5 per cent to 1% of the loan amount.
In the case of gold loan, borrowers do not require to show income proof documents when applying for a it because they are using their gold holdings as security. Processing costs are not included in this calculation.
3. Loan Tenure
When the lender, whether Banks or NBFCs, receive personal loan applications, they evaluate the income of proof papers in the absence of collateral. They also perform an extensive due investigation to ensure that an applicant has sufficient repayment capabilities. This is a time-consuming process that may cause the loan to be delayed.
Whereas, in the gold loan, the procedure is straightforward. Borrowers sign various forms and present their gold valuables as collateral. Following that, the loan amount is approved.
4. Flexible Repayment Options
A personal loan or a gold loan will let the borrower repay their loan through EMI, allowing them to evade most repayment restrictions. However, the repayment choices for gold loans are more flexible compared to personal loans. They are more accommodating to clients since secured loans guarantee on-time payments. Borrowers of gold loans can pick from a variety of repayment methods.
To repay a gold loan borrower can simply choose the usual EMI option. They can also choose to return the interest during the course of the loan and pay the principal at the conclusion of the mandate. Borrowers may opt to pay the interest and loan amount in one single sum at the conclusion of the term. Gold loans provide solutions to boost your repayment ability, giving you the best chance of paying off your loan.
5. Low-Interest Rates
When comparing gold loans to personal loans, it becomes clear that gold loans have cheaper interest rates. A gold loan is sanctioned at interest rates ranging from 11 to 13 per cent, but a personal loan is sanctioned at rates ranging from 16 to 22 per cent.
For a borrower, this means that taking out a gold loan is less expensive than taking out a personal loan. Even if they are constructed for the same amount of money, this makes repaying gold loans a little simpler than repaying personal loans.
Conclusion
Gold is still among the most popular investment option in most Indians. Furthermore, the steady rise and fall in gold prices provide investors with several opportunities to acquire the gleaming metal. In the long term, gold provides a profitable possibility to obtain a loan. It is reasonable to assume that taking out a loan against gold assets is a better investment than taking out a personal loan.
