Personal Loan vs Gold Loan: Which is Better?

Both personal loans and gold loans are usually taken on a short-term basis, for reasons such as unexpected medical expenses, financial crisis, debt clearance, etc. However, which option is better? Let’s find out.

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Personal Loan

A personal loan is an unsecured loan that can be availed for a variety of “personal” reasons such as buying a new car, managing wedding expenses, etc. The lender usually checks your income during the evaluation of your application.

Gold Loan

A gold loan is a secured loan, in which you offer your gold as collateral. Just like a personal loan, it can be taken for a variety of reasons. However, being a secured loan, it’s easier to get than a personal loan.

Differences Between a Personal Loan and Gold Loan

One of the biggest differences between a personal loan and a gold loan is the rate of interest. While for the former it lies between 18% to 24%, it’s only about 12% to 15% for the latter. This is of course because of the nature of these loans (unsecured vs secured).

Gold loans are also easier to get in comparison to personal loans. In most cases, you just need to submit the gold, file a few documents and the loan amount is disbursed in a few hours or so. You also don’t need to worry about your credit score too much in the case of a gold loan.

Conclusion

All in all, if you seek convenience and low-interest rates, then a gold loan is certainly a better option. However, it also means that your assets (i.e. the gold) are at risk if you are unable to repay the loan. Also, the loan amount is limited by the value of the gold you are able to provide as collateral. So, your choice should be based on your requirements and the amount of gold you have.