Why is a gold loan better than a personal loan?

But here are a few reasons that you must be aware of why gold loans are better than personal loans:

• Processing time: Both loans have a shorter processing time in comparison to any other type of secured or unsecured loan. But gold loans require way lesser time than personal loans. As in the case of personal loans a person does not need to pledge any collateral but in the case of personal loans lender companies do a lot of verification before approving the loan due to the absence of collateral. In the case of personal loans, you get a long list from the banks of the documents that you need to arrange. So, gold loans are hassle-free loans available in the market. 
• Loan amount: In the case of personal loans you can apply for a loan from the amount of INR 50,000 to INR 20 lakh. But in the case of gold loans as they are a type of secured loan. You can apply for a loan from the amount of INR 1,500 to INR 2 crore. So, a gold loan is a type of secured loan so your loan value directly depends on the value of your gold. You can have loan amount till 90% of the gold. But the personal loan depends on your income and credit score. So there are higher chances of getting a higher amount of loan in the case of gold loans compared to personal loans. 
• Interest rate: As there is a presence of collateral in the case of gold loans so gold loan interest rates are way lesser in comparison to interest rates of personal loans. So more people apply for a gold loan in comparison to a personal loan. But gold loans offer a reducing balance method to repay the EMIs. So on gold loans, a person can save more. The interest rate of the loan in the case of gold loans depends on many factors like LTV, loan tenure, etc. It also depends on the type of repayment option you are choosing to repay the EMIs. The interest rate will be higher in the case of gold loans if you will choose long loan tenure and a high LTV ratio. 
• Credit score: Many people become unable to apply for a gold loan because of its primary demand i.e. personal loans need a three-digit score to apply for. People who did not take any loan or did not use any credit card before in their life become unable to earn any credit score. On the other hand, gold is a commodity that can be found in any Indian household. So, it is easier for Indian people to apply for a gold loan in comparison to a personal loan. Many banks and NBFCs like Indian Overseas Bank Gold loan, etc. offer gold loans. Identify the best offer for yourself and grab the opportunity. 

Both gold and personal loans do not come with any restrictions on how you should use that fund. Both gold loans and personal loans have a shorter processing time. Those are the main reasons for the popularity of both these loans these days and also the main reason why people prefer these loans during financial emergencies. But the main thing is applying for a gold loan or personal loan totally depends on various factors like availability of collateral, credit score, availability of documents, etc. You need to see the pros and cons of both the loans before applying online or offline, all you have to do is just make a proper plan before this financial service or product.