Gold Loan vs. Personal Loan - Which is Better & Why? (InfoGraphic)

1. Pledge of Collateral

To avail of a gold loan, you need to pledge gold as collateral. The gold loan has a higher loan-to-value ratio, meaning the lender can sanction up to 90% of the value of gold pledged as collateral. On the other hand, since personal loans fall under the unsecured loan category, you don’t need to pledge any collateral to avail of the loan from the lender. The personal loan amount depends on the borrower’s credit score and income status. 

2. Repayment Tenure

The gold loan’s repayment tenure ranges from 3 months to 3 years, whereas a personal loan’s repayment tenure ranges from 12 months to 5 years.

3. Interest Rates

The interest rate on gold varies among lenders and could go up to 25%. Whereas, the personal loan interest rate starts from 11.99% per annum. The final interest rate on the personal loan that is offered to a borrower varies because of various factors like credit score, income, employment status, etc.

4. Documentation

Since you are pledging your gold as collateral with the lender to secure the loan, it involves some extra documentation. Also, the lender charges gold handing charges over and above the interest rate. Whereas, in the personal loan, you are required to provide basic documents such as PAN and KYC, income proof, bank statements, etc.

5. Other Charges

In a gold loan, charges like processing fees, insurance and service charges, gold valuation charges, and other charges are levied during the approval of the loan. On the other hand, in the personal loan, the lender charges processing fees, insurance fees and service charges. 

6. Processing Speeds

The processing speed is slower for a gold loan compared to a personal loan. This is because, in a gold loan, the valuation of gold and the documentation process takes up time. Whereas, personal loans are approved within a few business days, as long as the applicant meets the eligibility criteria and has documents in order.

SMFG India Credit offers personal loans upto INR 25 lakhs* online for salaried applicants. Apply today to know more.