Personal Loan vs. Gold Loan: Which is Better?
Everyone needs financial assistance from time to time, and there is no shame in searching out loan options to get it. However, there are many borrowing options out there, and you might be having trouble deciding between them. The two most common types of loans available on the market are gold loans and personal loans. It is often seen that individuals, whether salaried or self-employed, go for either personal loans or gold loans. Yes, the two types of loans are taken by individuals to fulfil their expenses and needs. Since these are flexible loans, they can be used for all kinds of small and big expenses. There are no end-usage restrictions or limitations on end-usage. It is good to take an instant personal loan online or a gold loan based on your needs. However, if you are confused between the two options, you need to choose the ideal one. This will be easy when you compare the two options before choosing one.
What is the distinction between a personal loan and a gold loan?
Secured and unsecured personal loans
The first and most important difference between a gold loan and a personal loan is the secured or unsecured feature. A personal loan is completely unsecured in nature, which means you will be getting a loan without any security or collateral. Yes, you don’t need to pledge any security or collateral to get a personal loan. However, a gold loan is completely secured. The gold ornaments are pledged to the loan provider in order to get a loan. This means you have to have gold ornaments if you want a gold loan. This is the prime difference between a gold loan and a personal loan. You can easily get a personal loan without any security, but a gold loan needs security and collateral.
Eligibility criteria
It is important to note that the need for eligibility criteria is greater for a personal loan in comparison to a gold loan. Firstly, the eligibility criteria are high for unsecured loans since there is no security. Therefore, before offering an unsecured loan, it is important to check the financial stability and credit health to avoid risk. For secured loans, there is no risk. There is collateral or security involved, through which the loan provider is able to recover the amount. Therefore, keeping this in mind, we know that a personal loan needs high credit eligibility, which a gold loan does not. In a gold loan, the gold is kept as security to recover in the case of default. Therefore, eligibility criteria is not there for gold loans, but for personal loans it is.
Interest rates
The loan providers have different rates of interest for personal loans and gold loans. Gold loans are secured forms of loans that have a low rate of interest. On the other hand, a personal loan is completely unsecured in nature, which makes it more expensive than a gold loan. A gold loan interest amount can vary between 7.5% and 29%. In comparison to that, personal loans range from 9% to 24%. Gold loans have lower interest rates because they’re secured loans, meaning the borrower is using up collateral to reduce their risk of default. At the same time, personal loans will ultimately have a higher interest cost because of their unsecured nature.
Loan tenure
The lone tenure is the period of time during which the provider offers a particular loan to the borrower. Personal loans have a tenure that ranges between one and five years. However, gold loans always come with a short repayment period. which can be anything between one week and three years, depending upon the total loan principal value. When you choose a long-term loan, the monthly instalment amount will always be less in comparison to a short-term loan. Personal loans have flexible tenure where you can choose either a short-term or a long-term. However, for gold loans, the tenure is usually short.
Repayment options
In a personal loan, you need to make the repayment with the help of an equated monthly instalment, commonly known as an EMI. It depends upon the individual to choose the loan tenure and the monthly instalment amount according to their capacity. From the time the personal loan is taken till the end of the loan tenure, the same amount of instalment is paid every month by the individual. The repayment option for a personal loan is very straightforward and simple. However, for gold loans, the repayment option is much more flexible. The repayment option is much more flexible because it allows customers various kinds of repayment schemes.
Wrapping up
When you take an instant personal loan online, make sure you use a personal loan EMI calculator to calculate and compare the loan cost and EMI. Visit Clix Capital for an affordable personal loan.
