Sometimes, we are ambushed with financial uncertainties, leaving us high and dry. These are not the times to fret, but rather to look for possible options that could provide a solution in the market. These are the times when financing products such as a personal loan or a gold loan is the best available option.
Both these loans are quick and do not have any end usage restrictions. But how do you choose between a gold loan and personal loan? Which is better?
Let’s get these questions answered by comparing the features of the two.
Difference between Gold loan and Personal loan
A gold loan is a secured loan, meaning you need to pledge physical gold as collateral. If you fail to repay, the lender can use this gold to recover the outstanding amount.
Conversely, a personal loan is unsecured, so there’s no need for collateral. Loans are approved based on your credit score, income, and other eligibility criteria.
This difference also affects the gold loan interest rates vs personal loan interest rates. A secured loan has lower rates than unsecured ones. This is so because the risk to lender is less in case of secured loans. Hence, gold loans will have lower rates. So, is gold loan better than personal loan? The answer is not that simple. One cannot answer this question based only on gold loan vs. personal loan interest rates. So, let’s consider all the parameters.
Gold loan vs. Personal loan
Here are the differences between gold loan and personal loan terms that will help you decide which is better, a gold loan or personal loan.
|Criteria||Gold loan||Personal loan|
|Gold loan vs. personal loan eligibility||Any major can apply for a loan against gold without any income proof.||Getting a personal loan approved can be difficult for someone with no regular income source. |
Additionally, when it comes to gold loan vs. personal loan interest rates, personal loan rates are also determined by your eligibility and credit score.
|Processing time for a gold loan or personal loan: which is better?||If you consider the processing time for a gold loan vs personal loan, sanctioning gold loans is quick since it is secured. You only need identity and address proof and the receipt of pledged gold, and you will receive your loan amount in a few days.||Though the online process has made loan applications convenient, the document verification process increases the disbursal time.|
|Additional fees for a gold loan vs. personal loan||Along with the processing fee, a gold loan involves gold valuation fees, documentation fees, and administrative costs. So, note all the charges while considering a gold loan vs. a personal loan.||The key difference between a gold loan and personal loan overhead fees is that the charges for personal loan sanctions are limited to processing fees, service charges, and insurance fees. |
So, which is better: gold loan or a personal loan? This depends on your repayment capacity and the total overhead charges in each case.
|Gold loan interest rates vs personal loan interest rates||Risk assessment for gold loan interest rate vs. personal loan interest rate is a huge determining factor. |
Interest rates for gold loans are low because the pledged gold reduces the risk of non-payment.
|Interest rates for personal loans vary among lenders. |
During your research about gold loans vs. personal loan interest rates, you will also find that personal loan rates are often much higher.
|Loan tenure||Another major difference between gold loans and personal loans is the loan tenure. The tenure of a gold loan starts from one day to three years.|
So, prefer gold loans if you are confident of making the repayment within a short duration.
|The loan tenure of a personal loan is generally between 12 to 72 months.|
For a larger loan amount and long-term repayment, opt for a personal loan. But remember, the longer the tenure, the higher the burden of interest payments will be.
Also, consider gold loan vs. personal loan interest rates while calculating your EMI.
|Repayment of the gold loan vs. personal loan||In the case of gold loans, some lenders allow borrowers to pay monthly interest amounts while repaying the principal amount at the loan’s maturity. Others may allow you to make the principal payment upfront and repay the interest amount monthly.||You can repay your loan in EMIs that consist of both the principal and the interest components.|
Gold loan or Personal loan: which is better?
Gold is an integral part of Indian customs, culture and traditions. Most Indian households own some or the other form of physical gold. It is seen as an ideal gift given on marriages, inheritance to be passed on from one generation to the next, secure investment and an emergency net, as it appreciates well and can easily be converted to cash. Then, is gold loan better than personal loan for you. If you possess gold assets and have an urgent need for cash, you can apply for a gold loan.
Personal loans are best for longer repayment durations and larger loan amounts. Should you have a loan requirement that does not require repayment in short-term duration or an amount that is high, personal loan is what you should be opting for. Take a personal loan if you have a stable income and good creditworthiness.
Gold loan or personal loan, which is better? Well, these two loans have their pros and cons. So, it is important to assess your situation and understand the difference between a gold loan and a personal loan.
So, the question of which is better, gold loan or personal loan, can be best answered based on the above parameters and your financial requirements.
If you need immediate funds, consider applying for a loan with Tata Capital and enjoy benefits like quick disbursal, minimal documentation, flexible loan repayment, and attractive interest rates, among many others. Visit our website to learn more.