Personal Loan

  • A personal loan is an unsecured loan or advanced based on the borrower’s credit history to meet the current financial needs such as
      • Financing a wedding
    • Vacation
    • Medical emergencies
    • Debt consolidation
    • Vehicle purchase
    • Pay off taxes etc.
  • Repayment of personal loans is done usually through a fixed amount of installment over a fixed period of time.
  • Some of the non-banking financial companies also provide personal loans to meet the need of the customer or prospective buyer.

Gold loan 

  • It is a simple concept against which one can borrow money by pledging
    • Gold ornaments
    • Coins
    • Bars, and
    • Biscuits etc.
  • It is the easiest way to get a loan with less time & documentation work.
  • The main reason for keeping gold as security to get the security of the payment given by the lender to the borrower.
  • The interest rate charged by the lender usually on these loans lies between 12 to 16 percent.

Which one is better Personal loan or Gold loan

  • A personal loan or gold loan is the easiest way of getting a loan to meet the current financial needs of the prospective buyer.
  • Personal loan or gold loan comes under the tenure of 1 to 3 years & the rate of interest lies between 16 to 22 percent.
  • A borrower has to arrange a guarantor for taking the personal loan while taking a gold loan the buyer should be confident of returning the money.

Advantages of gold loan

  • It does not require any certificate as salary or income proof & even credit card history is not required which helps unemployed & nonworking people can go for the gold loan.
  • The main advantage of the gold loan is its low-interest rates as compared to the personal loan. Usually, the gold loan has lower interest rates as compared to a personal loan.
  • The borrower will have an option to pay only interest at a regular interval of time or pay complete the borrowed amount in a single shot.

Advantages of Personal loan

  • It is a relatively quick way of getting the loan as it requires less documentation work.
  • There is no restriction on how you can spend the money.
  • It is the most convenient way of getting loans as it does not require any collateral.

The disadvantage of Personal loan

Qualification criteria

  • To get personal you need to qualify as per guidelines of the bank & after doing that there is no delay.
  • Every bank has their own guidelines & the lender observe strict guidelines in case of no collateral security.

Credit history

  • Credit history plays an important role when you apply for a personal loan otherwise your application may get rejected. No lender wants to give a Personal loan with a bad credit score.
  • Applying for a personal loan with the new financial institution may result in more paperwork & references for verification.

Disadvantages of Gold loan

Possession Taken

If a buyer is not able to repay the loan, in that case, the bank will take possession of the pledged gold or the jewelry to recover its dues.

Less Value

  • The bank or the non-banking financial will give less value as compared to the value of gold.
  • For example, If you are mortgaging gold jewelry worth INR. 2 lakh, you can at best loan of only up to INR. 1,50,000. Apart from that add to it loan processing fee & other charges which reduce the final amount you can get in hand.

In conclusion, it must be pointed out that both gold loans and personal loans have their own unique features that make them suitable for specific situations depending upon your individual requirement. Therefore make sure you seek out all options available to you before you apply for personal loan or a gold loan.