Although the difference between the interest rate of both these loans may not be much for those with a good credit profile, the interest rate of a gold loan usually tends to be lower than a personal loan for those with a poor credit profile.
For any urgent financial requirements that help people fulfill their needs, personal or gold loans are two convenient borrowing options.
Here are the comparison of the features of personal loan and gold loan available for customers
Interest Rates: Depending on the lender and applicant’s credit profile, Personal loan interest rate usually ranges from 10 percent- 24 percent p.a. Depending on the risk assessment of the loan applicant by the lender, loan tenure, loan amount, and repayment option opted for, gold loan interest rate can widely range between 7.00 percent- 29 percent p.a.
Interest rates are charged very high for the higher loan amount by some lenders. The interest rate of a gold loan usually tends to be lower than a personal loan for those with a poor credit profile. For those with a good credit profile, the difference in the interest rate of both these loans may not be much.
Loan Amount: The loan amount eligibility set by lenders is primarily based on the applicant’s repayment capacity and the loan tenure. The personal loan amount usually ranges from Rs 50,000- Rs 15 lakh, with some lenders claiming to disburse the higher amount of Rs 30 lakh to Rs 40 lakh.
The loan amount primarily depends on the valuation of gold deposited as collateral and the lender's loan-to-value (LTV) ratio in the case of a gold loan. Depending on the lender, repayment option opted for, the LTV ratio of gold loan can vary. The RBI has imposed a regulatory cap of 75 percent on the gold loan LTV ratio.
Disbursal Time: For getting their loan application processed, borrowers are required to deposit their ITR forms/payslips and other documents while submitting personal loan applications. Disbursal of personal loans may take up to 2-7 days as the verification of these documents tends to take some time. In the case of the pre-approved ones, some lenders claim to offer quicker disbursal of personal loan.
The gold loan has one of the quickest disbursals among all loan options usually disbursed within a few hours of submitting the loan application.
Repayment Tenure: Some lenders offer maximum tenure of up to 7 years, while the tenure of a personal loan generally ranges from 1 to 5 years. For most lenders, the repayment tenure of the gold loan is generally on the shorter side, with maximum tenure going up to just 3 years. Slightly higher tenure of around 4-5 years are offered by some lenders.
Poor Credit Profile: Lenders prompt to take a cautious approach due to the unsecured nature of personal loans. Applicant's credit scores, monthly income, job profile, employer profile, etc are primarily factored to approve the personal loan. Based on credit profiles, some lenders have also started setting the interest rate for personal loan applicants.
Backed by adequate collateral, gold loans are fully secured loans. In case of default by the borrower, this allows lenders to sell the pledged gold. While approving gold loans to those with poor credit scores and credit profiles, lenders tend to take a less stringent lending approach.Processing Fees
: In the case of gold loans, charges usually tend to go up to 2 percent of the loan amount, with some lenders charging flat fees starting from as low as Rs 10 onwards. The processing fee of personal loans usually ranges around 1 percent-3 percent of the loan amount.