When you need financial assistance or, in simple terms, money, you have several options. However, most people opt for personal loans or gold loans. Many believe that personal loans are more expensive than gold loans. If you feel the same, we have gathered some essential information about both types of loans, which will help you assess which is better for you.
Interest Rate
Personal Loan: These loans are unsecured, meaning they don’t require collateral. Due to the higher risk to lenders, the interest rates are usually higher.
Gold Loan: Since gold is used as collateral, the risk to lenders is lower, which results in lower interest rates compared to personal loans.
Loan Amount
Personal Loan: The loan amount depends on your credit score and income. A higher credit score can help you secure a larger loan amount.
Gold Loan: The loan amount is based on the value of the gold you pledge. The more gold you pledge, the larger the loan amount you will receive.
Loan Tenure
Personal Loan: The repayment tenure is generally longer, ranging from 1 to 5 years.
Gold Loan: The tenure for gold loans is typically shorter, ranging from 3 to 12 months.
Approval Process
Personal Loan: The approval process involves detailed paperwork, checking your credit score, and verifying your income, making it a longer process.
Gold Loan: Approval is quicker as gold acts as immediate security. It requires minimal paperwork.
Purpose
Personal Loan: Personal loans can be used for various personal needs, such as medical emergencies, weddings, travel, or education.
Gold Loan: Gold loans are often used when you need immediate cash, especially if you have gold jewelry.
Return
Neither personal loans nor gold loans provide returns. Both are simply borrowed amounts that need to be repaid.