Whenever a financial emergency comes up, people prefer loans as the first option for financial relief. Among the many loan options available are gold loans and personal loans. Even though both of these loans provide access to money, a loan on gold is more favoured by the people for their affordability, ease and flexibility. This article discusses some of the major benefits of choosing a gold loan over a personal loan, especially considering the Indian financial context.
Key Reasons To Choose A Gold Loan:
When in need of financial assistance during emergencies, borrowers prefer the best gold loan over a personal loan due to the following reasons:
- Affordable interest rates:
- Secured vs. Unsecured loan
Gold loans are a secured loan, meaning you offer your gold ornaments, coins, or jewellery as collateral to the lender. Later, the lender keeps your gold until you complete the gold loan repayment. This eventually reduces the risk for the lender.
- Interest rate comparison
Due to the reduced risk in gold loans, typically, lenders charge affordable rates of interest. This is the reason why people prefer gold loans over personal loans, as personal loans come with higher rates of interest.
- Smooth approval and disbursal:
- Simple approval
Under gold loans, one of the major benefits is the seamless approval process, as the eligibility of the borrower is monitored on the basis of the gold value.
- Turn-around time
The loan amount you get after applying for a gold loan is disbursed in a short time once your application is approved. This speed makes gold loans an ideal option for emergencies such as urgent home repairs or medical bills.
- Suitable for borrowers with a low credit score:
- Not dependent on credit score
A gold loan against jewellery comes with a lifeline for borrowers who might be unable to qualify for personal loans because of non-existent or low credit scores. Under a gold loan, lenders are highly interested towards the purity and weight of the gold you keep as collateral rather than your borrowing history.
- Simple eligibility criteria
When applying for a gold loan, the gold loan eligibility criteria are simple and mostly dependent on the purity and weight of the gold you give to the lender as collateral, unlike other loans that come with strict criteria, including a stable job, good credit score, and consistent income.
- Loan repayment:
- Flexible repayment options
Lenders provide multiple repayment options for gold loans to the borrowers. This high flexibility and tailored repayment method enhance the cash flow of the borrowers.
- No effect on credit score
When a borrower fails to repay the gold loan amount, the lender auctions the pledged gold, jewellery, or ornaments in order to recover the amount. Even though it is a loss of assets for the borrower, their credit history is not affected until the situation escalates legally.
Conclusion:
Gold loans are an efficient and practical alternative to a personal loan for several reasons. With seamless processing, affordable rates of interest and lenient eligibility criteria, these loans provide significant benefits, especially for borrowers who have short-term needs. Additionally, individuals who have gold assets and require immediate access to funds, a gold loan is a safer and smarter financial option.