gold loan vs personal loan: which one is better to have?
Gold Loan vs Personal Loan
with covid-19 in our lives, the job cuts and layoffs are innumerous, making borrowings a very common way of overcoming these temporary financial troubles. in case of any short term cash crunches, personal loans or gold loans can prove to be very useful and handy.
personal loans are usually unsecured loans, i.e. you do not need any asset to back the loan. the only thing that matters when you’re taking a personal loan is his/her credit history and income. since these are riskier than other forms of loans, they usually attract a relatively higher interest rate.
on the other hand, a gold loan or loan against gold is essentially a secured loan given against the asset, i.e. gold jewellery. as per the rbi guidelines, a gold loan can presently be issued only against gold jewellery and not against coins or bars and only at 75% value of the total. since this is a secured loan, the risk level is much lower, thereby attracting lower interest rates.
whichever suits your financial needs should guide your decision. other than that, there are various factors on which these vary. hence, you must be thorough about the advantages and disadvantages of both options before finalising one.
basis | personal loan | gold loan |
|---|---|---|
processing time | since personal loans are unsecured loans, there is quite a lot of documentation required.verification of these documents takes some time, thereby making the processing time a bit longer. | since gold loans are secured loans, the documentation required is minimum. also, since the lender takes possession of the asset until the repayment is made, the disbursal is quick and easy. |
loan amount | depending on the borrower's repayment capacity and credit score, the amount can be anything between ₹ 50,000 and ₹ 20 lakh or even higher. | being a secured loan, the amount is usually decided on the valuation of the assets deposited as collateral. |
interest rates | since they do not demand any collateral, the rates of emi interest are higher. | gold loans usually have cheaper interest rates than any other form of loan, thereby making it a preferable option for many people. |
tenures | personal loans are better if you're willing to pay back the loan in the next 3-5 years. | for short term loans, gold loans are the best options. typically they are offered for a tenure of 2 years. |
repayment | personal loans allow you only for loan emi options for a selected tenure of your choice. | gold loans offer many flexible repayment options. |
eligibility | to apply for a personal loan, you must have a monthly income of more than ₹ 25,000, a total work experience of more than 3 years and a minimum of at least 650 credit score. | whereas to apply for a gold loan, there is no need for an income. you only require the gold ornaments that will be used as collateral and you have to be above 18 years of age. |
now that you’re aware of all the guiding factors for personal and gold loans, it should not be that difficult to choose and finalise. meanwhile, if you’re exploring options of paying back in emi, you can check out the emi calculator by CRED to make your decision easier.