In India, gold plays a very integral role in society. People not only consider gold to be a safe asset, but it is a part of tradition and status symbol. Though people may not have a stable income, you can be pretty sure that they’d have gold to their name.
So, gold loans are quite popular in India. You can pledge your gold and the bank will lend you money. There are a lot of advantages to this kind of loan:
Lower rate of interest
– Since you are giving them security, the risk of the loan is low. In case you default, they can sell the gold and make up the money. So, banks generally charge a lower interest rate.
– You simply need to submit the gold and get it attested, and once the bank confirms the value, your loan will be disbursed.
– You don’t need to submit heavy documentation such as income proof, etc.
No need for stability
– You don’t have to prove that you have been in the same job or living at the same address for long time. As long as you are pledging the gold, the bank will be happy to disburse your loan.
The disadvantage of this loan is that you can get only up to 75% of the value of the gold. Your loan is also limited to the amount and quality of gold you have. In case you default on the loan, you risk losing your gold.
When it comes to personal loans, there are many things to consider:
- You don’t need security or a third-party guarantor to get your loan. The loan is given based on your income, age and stability. Because it is unsecure, the bank usually charges a higher interest rate.
– You should have a good credit score of 700 and above to get your loan approved. Some banks may accept 650. But this is an important area that they will consider before giving you a loan.
– Compared to gold loans, personal loans require more documentation to be submitted to the bank. You have to show ID, address, income proof, and apart from that, you might need to provide other documents at the bank’s request.
– A bank needs to know that you will stay and pay the loan. If you cannot show that you have kept a stable job or business, or that you have been moving houses often, then it alerts the bank that you are a risky customer.
Thus, for those who can’t show stable income,a gold loan is better than personal loans. We’ve made the comparison, now you can make your decision.