Gold loan is a cheaper and better option than personal loan: Here's why

NBFCs charge higher interest rates than banks, but offer faster disbursement with less paperwork

• Gold loans can rescue you during a temporary cash crunch. Many banks and non-banking financial companies (NBFCs) claim that a borrower can walk out with cash within 30 minutes
• Almost all forms of gold can be pledged, including jewellery and ornaments. A borrower can get maximum 75 per cent of the gold’s value as loan
• While banks offer cheaper rates than NBFCs, the latter cater to borrowers who don’t have access to banks and/or credit history
• A gold loan offers flexible repayment option. You can either pay only interest in equated monthly instalments (EMIs) and principal at the end of the tenure (bullet repayment), or opt for a regular structure - where both interest and principal are charged monthly
• If you fail to pay by the due date, the lender may slap a 2-3 per cent annual penalty. If you skip more than three payments, it can sell your gold to recover its dues after a grace period of 90 days
• Watch out for charges other than processing fee and interest rate. Some lenders also charge 0.25 per cent for valuation and custodial charges