Financial emergencies never come foretold, and in such situations, personal loans and gold loans come to the rescue. While there are several other loan options, these two offer the most lucrative and instant funds to borrowers. The reason is the quick approval of large loans without much involvement of heavy documentation or credit checks.
But how do you decide between the two?
Let’s discuss both these loans in detail to help you choose the best one as per your needs. The comparison will provide you with an idea of which loan is better to go for and wield during times of emergency. So, let’s begin by understanding the term online gold loan and how they work.
What is a Gold Loan?
A gold loan is a secured loan that is given against the gold entrusted by the borrower. After taking the gold, the lender provides the borrower with money equating to the pledged asset (as per the lender’s LTV policies), which can be repaid in EMIs, part payments, or bullet payments. There is no requirement for credit scores or income proof. Borrowers can simply carry their gold along with basic identity and address documents and avail of the loan in one visit.
What is a Personal Loan?
Personal loans are unsecured loans which means that they do not involve collateral. The amount borrowed is repaid in EMIs over which an interest rate is applied. The loan amount disbursed depends on the credit score, income, and repayment capacity of the applicant. The loan approval process is slightly more time-taking as it involves credit checks and documentation, unlike an instant gold loan.
Differences Between Both the Gold and Personal Loans
When money is an immediate requirement, gold loans and personal loans both offer a quick resolution. Both these loan types do not demand the cause for taking the loan, and you can use the amount to fund any need. However, gold loans and personal loans are different from one another in several aspects, and thus you must compare both before choosing the right one as per your requirement.
Let’s know the differences between a personal loan and a gold loan in terms of the following aspects.
Personal loans are offered up to Rs 25 lakhs. The loan eligibility depends on your credit score, income, existing debts, and age. However, for loans against gold, the amount depends on the asset. Gold can fetch you up to 80% of its market value as a loan.
Gold loans being secured, exact an interest rate of as low as 6.3%. While interest applied on a personal loan ranges between 12-26% as it is an unsecured loan. A credit score heavily impacts the interest in the case of a personal loan. As opposed to this, gold loan interest rates depend on the loan amount and the gold loan scheme chosen. Use the gold loan calculator to check the interest rate for gold loan schemes as per your requirement.
Loan tenure in both cases is flexible. Where personal loans provide tenures as long as 5 years, gold loans offer up to three years for repayment. You can choose the tenure as per your budget. But it is important to note that while longer tenures result in smaller monthly payments, it leads to an increase in the total cost of the loan. The online EMI calculators for gold loans and personal loans can help calculate the suitable tenure and amount based on your affordability.
Both the loans provide the ability to repay the loan in terms of EMI or Equated Monthly Instalments. The repayment tenure can be chosen by the borrower and the EMI they can afford to pay each month on their current income.
Also, Read– Facts That Prove Gold Loans To Be A Convenient Lending Option
After this detailed comparison between gold loans and personal loans, you can easily choose the right one as per your eligibility and requirement. If you have a low credit score or equity equal to the amount you require, then it is best to choose a gold loan. Use the gold loan interest calculator to find the right interest rate. Check the eligibility, processing fee, and other charges before applying for a hassle-free application and quick approval.