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Gold loans have gained significant popularity due to their accessibility and the intrinsic value of gold
Many individuals prefer gold loans due to their quick access to funds and lower interest rates compared to personal loans. (Representative image/Shutterstock)
As the festive season approaches, many people seek ways to fund their celebrations, whether it’s for gifting, travel, or home renovations, or for enhancing their business during the festive season. Two popular financing options are gold loans and personal loans. Understanding the advantages and differences between these two can help you make an informed decision for your festive aspirations.
Gold Loans vs. Personal Loans
Gold loans have gained significant popularity due to their accessibility and the intrinsic value of gold, making them an excellent choice for festive financing. One of the primary advantages of gold loans is their quick access to funds, with approvals often granted in as little as 30 minutes. This speed is particularly beneficial for urgent festive expenses.
Additionally, gold loans generally offer lower interest rates, typically ranging from 10% to 20%, compared to personal loans, which can be between 12% and 24% or even higher. The lower rates are due to the loans being secured by the value of gold, thus reducing lender risk.
In terms of repayment options, gold loans provide flexibility, allowing borrowers to choose tenures typically from 6 months to 2 years. This can be particularly useful during the festive season when expenses vary. Another significant advantage is that gold loans do not require a credit history, making them accessible to individuals with limited or poor credit.
As many as 70% of gold loan customers are first-time borrowers, highlighting their inclusive nature. Furthermore, borrowers can leverage unused gold jewelry for cash without selling it, providing substantial funding for festive needs. Gold loans also have the advantage of lower payouts as customers often service interest only during the tenure of the loan, and this can be attractive to customers where their cash flow dictates minimal outgoings during the tenure of the loan.
On the other hand, personal loans also serve as a popular financing option. They are unsecured, meaning no collateral is required, which can be appealing for those who want to avoid risking their assets. However, this comes with higher interest rates. Personal loans can offer larger amounts, often ranging from Rs 50,000 to Rs 25 lakhs, which is advantageous for those with extensive festive plans. They also provide flexible use, allowing funds to be utilized for various purposes, such as gifts, travel, or home improvements.
Personal loans usually have longer repayment periods of few months to several years, easing financial burden during festive seasons.
The allure of Gold Loan during the festive season:
As the festive season draws near, both gold loans and personal loans present viable options for financing your celebrations. If you seek quick access to funds at lower interest rates, a gold loan may be the better choice. Strategically utilising gold loans can drive substantial growth during the festive season. Many individuals turn to gold loans to finance home renovations or purchase new items for celebrations.
Small business owners take loans to stock up on popular products or launch festive items, ensuring adequate inventory to meet heightened customer demand. Additionally, directing funds toward targeted marketing campaigns and festive promotions can help attract more customers through digital advertising, in-store decorations, or special offers.
Many individuals prefer gold loans due to their quick access to funds and lower interest rates compared to personal loans. Gold loans require minimal documentation and can be approved within hours, making them a convenient option for urgent financial needs. Additionally, since they are secured by gold, there’s no dependency on credit history, making them accessible to a wider audience. This combination of quick processing, lower costs, and ease of access has led to a growing preference for gold loans during festive seasons.
-The author is the founder of Radian Finserv. Views expressed are personal.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before making any investment decisions.
