Borrowing a personal loan or gold loan can be extremely beneficial in order to pay for a financial emergency. They can be used for multiple purposes. However, choosing between them can be difficult.
In this article, we will explain the differences between a gold loan and a personal loan.
Nowadays, banks offer various loan options. Some of these loan options are personal and gold loans. These loans can be useful in case of a financial emergency. Both the types of loans can be borrowed for multiple reasons. Unlike a home loan, which can only be borrowed to purchase a house, a personal or gold loan can be used for various purposes. Furthermore, availing them doesn’t require much effort. However, there are a few differences between both the types of loans.
Gold Loan
A gold loan is a secured loan. This means that a borrower needs to keep his/her gold ornament(s) as collateral in order to take the loan. A gold loan is a great option in case of short-term financial requirements.
Benefits of Availing a Gold Loan
- Quick Disbursal
A gold loan can be disbursed quickly. This is because the process of availing a gold loan doesn’t take a lot of effort.
- No Requirement of Credit History
In order to avail a gold loan, a borrower needs to provide gold ornament(s) as collateral. Therefore, a gold loan is a secured loan. Hence, banks don’t require the borrower’s credit history in order to provide him/her with a gold loan.You can also avail Cash against Gold which would be 99% around the actual value
- Repayment Flexibility
Gold loans offer various repayment options. A borrower can repay the loan via regular EMIs. Another option is to repay the interest amount during the loan tenure, and the remaining amount can be paid at the end of the loan term. Furthermore, a borrower can repay the entire loan amount at the end of the loan tenure.
- Lower Interest Rate
Gold loans are secured loans. Therefore, a gold loan’s interest rate is lower compared to other types of loans. Hence, many people prefer a gold loan over a personal loan.
Personal Loan
A personal loan is an unsecured loan. If a borrower takes a personal loan, then he/she doesn’t have to provide any collateral. Personal loans are one of the most common types of loans.
Benefits of Availing a Personal Loan
- No Collateral Required
This is one of the most important benefits of a personal loan. In order to avail a personal loan, a borrower doesn’t have to keep any asset as collateral.
- Multi-Purpose Loan
A personal loan can be borrowed for various reasons. A borrower can take a personal loan to pay for a financial emergency or fund a big-ticket expense. There is no restriction on the usage of funds.
- Quick Disbursement
Most banks disburse the loan amount quickly.
In conclusion, a gold loan can be a good option for a person who wants to repay the loan at a lower interest rate. However, a person who prefers a longer tenure should consider a personal loan.
