Gold loan vs personal loan: Factors such as requirements of collateral and creditworthiness vary in the case of personal loan and gold loan
Gold loan vs personal loan comparison: When in need of extra funds or in an emergency where one requires money urgently, then personal loans and gold loans can be the quickest solution. And by comparing the advantages, disadvantages and the characteristics of both these loans, borrowers can find the cheaper and viable option which suits their needs. Factors such as requirements of collateral and creditworthiness vary in the case of personal loan and gold loan, so before borrowing one must consider the below points to see which loan suits their needs and how they can save the most money.
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Gold loan vs personal loan: Collateral
Personal loans are unsecured, which means the borrower doesn’t have to pledge any collateral to avail the loan. And their creditworthiness alone determines their eligibility and the loan amount.
On the other hand, gold loans are secured loans where gold items are pledged as collateral. And the value of the gold pledged determines the amount of loan one can avail.
Gold loan vs personal loan: Dependence on credit score
The borrower’s credit score determines the approval, loan amount, and the interest rate of the personal loan.
Whereas gold loan approval does not depend on one’s credit score, as it is secured against the value of the gold collateral.
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Gold loan vs personal loan: Tenure
If the borrower requires a longer loan repayment, then it is wiser to opt for a personal loan, as they come with smaller and manageable monthly payments.
In comparison, gold loans generally have shorter loan tenure ranging from a few months to a few years.
Gold loan vs personal loan: Flexibility in usage
The amount borrowed through personal can be used for medical emergency, travel, education or for any personal or business needs.
Whereas some gold loans lenders have a policy that restricts the use of funds for business or commercial purposes only.
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Gold loan vs personal loan: Interest rates
As personal loans are unsecured, they come at higher interest rates. And the borrower’s creditworthiness determines the rate of interest.
And between the two, gold loans have lower interest rates, as the lender has a lower risk due to the collateral pledged.
As far as the prevalent interest rates are concerned, gold loans start anywhere close to 7 to 8% interest rate, whereas personal loan interest rates range beyond the 10 to 11% mark.
Gold loan vs personal loan: Points to remember
Personal loans are better bet for those who have no collateral, require fund quickly and need longer time to repay.
On the other hand, gold loans are more suited for those who have low credit score, but have gold lying idle in locker or at home which they want to utilize. Borrowers can enjoy cheaper gold loan, but it can be restrictive as far as utilization is concerned and have stricter repayment options.
