Between Personal loan Vs Gold loan, which is the better option?

Gold holds an integral place in Indian culture. It is a part of every occasion, right from a baby shower to a wedding. Given its intrinsic value, gold is also an excellent financial asset. This is why it is used as security when individuals apply for loans.

However, during a financial crisis, what would be a better option when you compare personal loan vs gold loan?

Both the loans can be used to cover emergency and unexpected expenses like medical fees, home renovation, shortfall of funds during wedding planning, etc.

Before availing a loan, it is imperative that you know the difference between both so that you can make an informed decision.

Gold Loan

What is a Gold Loan?

A gold loan is primarily a secured loan. While availing a loan against gold, the borrower must pledge their gold of a specific value as security and insurance. This pledged value of gold should be equivalent to the amount of loan that is needed by the borrower. 

The funds from a gold loan can be used for multiple purposes and can be the solution to an emergency financial crisis.

However, if the borrower is unable to repay the loan against the gold during the stipulated tenure, the lender gets the ownership of the gold to retrieve the costs

What is a Personal Loan?

To begin with, a personal loan is an unsecured loan. This means that the borrower does not need to pledge any asset as security against the loan. All the borrower needs is to check all the boxes of the personal loan eligibility criteria. 

Lenders will typically look at the monthly income, employment, professional history as well creditworthiness of the borrower. Based on these factors, a personal loan is disbursed

Personal Loan vs Gold Loan

Difference Between Gold Loan and Personal Loan

DescriptionGold LoanPersonal Loan
Interest ratesBeing a secured loan, the interest rates tend to be lower ranging from 7% to almost 20%.An instant personal loan may have relatively higher interest rates, ranging between 16% to 26%.

 

 

Eligibility

  • Applicants need to be above 18 years of age. 
  • Lenders do not ask for income or employment proof from the borrowers.
  • Under the gold loan process, applicants need to pledge some amount of gold, equivalent to the loan amount. 
  • Applicants need to be between 21-45 years of age.
  • Applicants need to be employed in a private, public limited, or LLP organisation.
  • Applicants need more than Rs. 20,000 as monthly in-hand salary.
  • Income must be received in a bank account. 
CollateralA loan against gold requires security. These loans do not require any collateral.

 

Loan Amount

The loan amount for a gold loan depends on the gold held as security. Typically, the loan disbursed can be up to 90% of the value of gold.These loans tend to have a fixed cap. Borrowers can get a personal loan from lenders like Finnable ranging between Rs. 50,000 and Rs. 10 lakhs.

 

EMI Options

Like anyl loan, the EMI will be calculated based on the amount of loan on gold, the tenure and the interest rate.Based on the loan amount, the tenure of the loan, and the applicable interest rate, the EMI can be calculated.
Applicants can use an online EMI calculator to find out the EMI amount to be paid.

 

Repayments

While some gold loan lenders follow the same loan repayment procedure applicable to a personal loan, certain lenders can charge the interest first and then ask the borrower to repay the principal amount. Personal loan repayments are done throughout the loan tenure in installments known as EMIs. It consists of both the principal as well the interest amount. 

Documents

The documentation for gold loans includes identity and address proofs, proof of ownership for the pledged gold, etc.The list of documents required consist of PAN card and Aadhar card as identity proofs, 2 salary slips, and employment proof from the employer.
Loan AssistantLenders do not have dedicated loan assistants to help borrowers with their gold loan queries, but there are specific companies that deal only in loans against gold.A dedicated personal loan assistant is available to help borrowers and applicants with their loan queries.

Security

Collateral against the loan will be the gold owned by the borrower.Personal loans do not require any collateral or security.

So, to answer the question of which is better, a gold loan or a personal loan, it is always best to look at your needs and preferences first. 

For individuals who require a higher loan value and have gold that can be kept as collateral, a gold loan can be suitable. However, in terms of convenience and ease, a personal loan would be ideal.

Unlike a gold loan, a personal loan is an instant loan and borrowers can apply online. Lenders like Finnable offer instant personal loans that can be used for multiple purposes. Borrowers can now avail this loan from Finnable online, that too from the comfort of their home or office.

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