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How Gold Loan scores over Personal Loan?

November 7, 2011   ·   2 Comments

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Are you planning to take a personal loan? Whenever an urgent need for money falls on us what are the first few alternatives comes to our mind. I guess most of the people either approach their friends, relatives to borrow the money or approach a bank or financial institution like NBFC for taking loan. There is new loan facility developing fast in India i.e. Gold Loan. Have you tried consider it for taking a loan? Let us compare both the products to know which one scores over other on different attributes.

GOLD LOAN

http://stockssavvy.comGold loan as name suggest is a loan on gold. It is one the one of the oldest form of loan which is now being offered by financial institutions at a bigger level. Muthoot Finance is India’s largest Gold loan sanctioning company. Anyone having gold in the form of ornaments or otherwise can take loan from banks or financial institutions against there gold product. When you approach a bank for gold loan, they first evaluate the value of gold on the basis of market price of gold and its purity. After evaluation, lender offers the loan amount to the customer which usually varies from 70% to 90% of the amount of gold.

PERSONAL LOAN

Personal loans are offered by almost all the banks and financial institutions. Personal loans are called as unsecured loans as this is not secured against any collateral. Banks take few things into consideration before approving the amount of loan applied. Out of all, most importantly monthly income of the borrower

Comparison between Personal Loan & Gold Loan

Attibutes

Personal Loan

Gold Loan

Processing Fee High Processing Fee Low or No Processing fee
Documentation Complete Documentation Less or No Documentation
Interest Rate High Interest Rate 15% to 30% Low Interest Rate 10% to 17%
Tenure Loan Tenure is usually 3 to 5 years Loan Tenure is usually 3 to 12 months
Loan Amount Loan amount depends on borrowers income Loan amount depends on gold value
Eligibility Joint loan with another earning member can increase your loan eligibility Loan eligibility criteria are only the amount of gold you possess.
Sanction Time Few hours mostly on the same day 2 to 7 Working Days
Collateral Unsecured Loan – No Security Needed Secured Loan – Secured Against Gold
Credit History Credit History Check Is Done Before Sanctioning Loan No Need For Credit History Check
Prepayment Charges Bank usually do not impose any foreclosure penalty Impose 3% to 4% charge on the foreclosure of loan. 
Joint Loan Option Joint Loan option is available to increase the Eligibility No joint loan option is available to increase the limit

Gold Loan stands way beyond when it comes to getting loan for a consumer with the sheer pace it is sanctioned & the interest rate one has to pay. It is especially beneficial if a person has need for money for less than 1 year.

Food for thought: There is still no good option for a customer if he wants to take a loan for short term(less than a year) if he doesn’t have gold in hand to take the loan.

Have you tried Gold Loan or personal loan? What do you feel will survive in long run? I will appreciate your comments, questions.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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  • Nice Post.

  • Anonymous

    Thanks Priya…

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