Which loan will be the easiest and in the shortest time? So you have two best options, personal loan and gold loan. Let’s understand which one to choose between gold loan and personal loan? Know their interest rates and basic differences…
Explainer Gold Loan Vs Personal Loan: Financial emergency often comes without any notice and in this situation we need money immediately. Whether the money is for marriage or to cover medical emergency. To meet these sudden needs, you may have to take a loan. Now the question is which loan will be the easiest and in the shortest time? So you have two best options personal loan and gold loan. Let’s understand which one to choose between gold loan and personal loan? Know their interest rates and basic differences…
What is a gold loan?
First of all, let’s talk about gold loan. In gold, you pledge your gold assets, such as coins or jewellery, as collateral. Usually, the lending bank or company provides a loan of 75% to 80% of the value of gold as a loan depending on the market value and quality of gold.
According to Aditya Birla Capital, the loan amount is calculated using the loan-to-value (LTV) ratio. You can repay the gold loan through EMIs and your gold is returned once the loan is cleared.
Is a gold loan secured or unsecured?
A gold loan is a secured loan as the collateral is your gold. Gold loans generally do not offer tax benefits unless the funds are used for home renovation, construction, purchase of residential property or business expenses.
For home renovation, you can avail a tax deduction of up to ₹1.5 lakh per annum under section 80C of the Income Tax Act, 1961. For purchase/construction of residential property, you can claim a tax deduction of up to ₹2 lakh per annum as per section 24 of the Income Tax Act, 1961.
Advantages and Disadvantages of Gold Loan
Advantages of Gold Loan: Unlike other secured loans, there are no restrictions on the use of funds from a gold loan. Most banks and financial institutions offer gold loans at competitive interest rates and the best part is that the loan approval and disbursal process is fast and easy. Credit history is not required for this.
Disadvantages of Gold Loan: If you cannot repay the loan, the lender has the legal right to sell your gold to recover the money. The LTV ratio varies for each lender, with the maximum being 80% of the value of the gold.
What is a Personal Loan
A personal loan is an unsecured loan. This means you do not have to provide any collateral to get funds. If the lending bank deems you creditworthy, you are eligible for the loan. Your eligibility is based on factors such as income, repayment history, type of employment and credit history. Banks check all these things rigorously. The better the credit score, the sooner the loan will be approved.
Advantages and Disadvantages of Personal Loan
Advantages of Personal Loan: You can get a loan without any security deposit or collateral. Personal loan interest rates are significantly lower than other unsecured loans like credit cards. Personal loans can be used to consolidate high-interest loans into a single monthly payment. With the help of personal loan, you can improve your credit score.
Disadvantages of Personal Loans: Personal loans attract fees and penalties which can increase the cost of borrowing. Processing fees can range from 1% to 6% of the loan amount. Your credit score greatly impacts your chances of getting a personal loan at a low interest rate. A poor credit score reduces your chances of getting a personal loan. Not paying EMIs on a previous loan can make it difficult to get a new personal loan.
Banks / Loan Institutions Interest Rates (per annum)
- HDFC Bank Starting from 10.85%
- ICICI Bank Starting from 10.85%
- Axis Bank Starting from 11.25%
- Kotak Mahindra Bank Starting from 10.99%
- IndusInd Bank Starting from 10.49%
- IDFC First Bank Starting from 10.99%
- Tata Capital Starting from 11.99%
- Money View 14.00%-36.00%
- Federal Bank 12.00%-19.50%
- DMI Finance Upto 30.00%
- L&T Finance Starting from 12.00%
- CreditBee 16.00% – 29.95%
- Piramal Finance Starting from 12.99%
- Aditya Birla Starting from 10.99%
Source: Paisabazaar.com
Comparing Gold Loan vs Personal Loan
Interest Rates: Gold loan interest rates are usually low (starting at 7.7% per annum). Whereas, personal loans have higher interest rates (8.50% to 13.60% per annum).
Processing Time
Gold loans usually have a low processing time, which can be approved within 90 to 120 minutes. Whereas, personal loans usually have a processing time of 48 months to 84 months.
Who can get a personal or gold loan
People applying for a gold loan should own gold jewellery that can be sold by the bank. Whereas, in the case of a personal loan, a lot depends on the applicant’s CIBIL score, income and employment stability.
Loan Amount
Gold Loan: The loan amount can be up to ₹25 lakh.
Personal Loan: The loan amount depends on the credit worthiness of the applicant and can range from ₹ 50,000 to ₹ 20 lakh.
Which institution is giving gold loan at what rate
Manappuram is giving gold loan from Rs 1,000 to Rs 1.5 crore at an interest rate of 28% per annum.
Interest on gold loan in SBI starts from 9.8% per annum. It gives loan from Rs 20,000 to Rs 20 lakh for 36 months.
Talking about HDFC, the interest rates in it start from 12.04% per annum. It gives gold loan starting from Rs 50,000 (Rs 10,000 for rural areas) for 6 months to 48 months.
Talking about ICICI, this private bank is giving gold loan from Rs 10,000 to Rs 15 lakh for 6 months / 12 months at an interest rate starting from 11% per annum.
Axis Bank is also offering gold loan from Rs 25,001 to Rs 20 lakh for a tenure of 6 months to 36 months at an interest rate of 15% to 17.5% per annum.
Canara Gold Loan
Starting from 11.95% p.a.
Rs. 10,000 to Rs. 10 lakh
Up to 12 months
Bank of Baroda Gold Loan
Starting from 11.65% p.a.
Rs. 25,000 to Rs. 10 lakh
Up to 12 months
Karnataka Bank Gold Loan
Starting from 10.65% p.a.
Maximum Rs. 5 lakh per account
Up to 12 months
PNB Gold Loan
10.05% to 11.05% p.a.
Yield purpose: No limit · Non-productive purpose: Up to Rs 10 lakh
India Infoline (IIFL)
9.24% to 24% p.a.
Starts from Rs 3,000
3 to 11 months
Kotak Mahindra Gold Loan
10.5% to 17% p.a.
Rs 25,000 to Rs 25 lakh
3 to 36 months
Federal Bank
Starts from 13.25% p.a.
Starts from Rs 1,000
As per lender’s terms and conditions
Central Bank of India
Starts from 10.65% p.a. (floating)
Up to 50 grams of gold can be pledged as collateral.
Up to 12 months
Source: Bankbazaar.com
