Is a Gold Loan Better Than a Personal Loan?
People in need of money have numerous options these days, but one has to be careful with the choices out there. Gold loans and personal loans have increasingly become the preferred options for emergency cash infusions. The reasons are self-explanatory: they are easy to apply, their loan disbursal is instant, and there are no restrictions on how you use the loan funds.
Both these loan options have their pros and cons and may either prove beneficial or become a financial burden for the individual. Here are some points to keep in mind about these two types of loans that will help you make an informed decision & plan your finances better.
What is a Gold Loan?
Gold loans are basically secured loans against gold, where you will have to give up your gold assets as collateral for your fund requirement. It is considered a good option for short-term money requirements and a certain percentage of the gold’s value is given to you as a loan. Once you pay off the loan, the lender will hand over the deposited gold back to you.
Below are some of the primary features of gold loans you should consider before deciding if this option is right for you:
Features of Gold Loan
Higher loan amount: A gold loan scheme usually provides a higher maximum cap on the loan amount than a personal loan. Most banks & financial institutions offer personal loans up to Rs.40 lakh, whereas lending institutions provide gold loans for a maximum of Rs.5 crore.
Credit history not required: With gold loans or jewel loans, you do not have to worry about credit score as credit history is not a deciding factor. Usually, you are not required to furnish your existing loans or debt obligations before applying for a gold loan.
Low-interest rates: Generally, the rate of best gold loans is lower than personal loan interest rates, which means the cost of a gold loan is less than other loan types.
Repayment flexibility: Gold loan companies provide various repayment options unlike other types of loans. The three most common repayments options are: regular EMI options, repay only the interest during the loan tenure and pay the rest at the end of the tenure or pay both the interest and loan amount at the end of the tenure
Personal loans are unsecured loans that are ideal for meeting short-term financial problems. A personal loan is a more popular option among individuals to take care of any urgent financial need, be it emergencies or unplanned big-ticket expenses. Following are some of the key features of personal loans you should consider before deciding to take a personal loan. Nowadays, apart from banks
Features of Personal Loan
No collateral: The greatest advantage of a personal loan is that borrowers are not required to submit any asset as collateral while applying for a personal loan.
Instant disbursement: Most banks & financial institutions transfer the loan amount into the borrower’s account within 48 hours after the loan has been approved. In the case of online loan apps, it happens in a few minutes!
Serve different purposes: Individuals can avail personal loans for various purposes such as a wedding, home renovation, house expenses or even for a family vacation overseas.
Minimal paperwork: Most of the time, personal loans do not involve elaborate paperwork. You will only be asked to provide basic KYC documents and proof of income as required by the bank.
Applying for a personal loan or gold loan depends entirely on your profile and needs. If you require funds immediately, have a good credit score, stable income & higher repayment tenure without keeping any of your assets as collateral, a personal loan is the best option for you.