Gold loans are often used by people who wish to purchase gold jewelry or add to existing holdings, who need a quick loan option that could be availed without any prior documentation. However, it is important to note that gold loans have higher interest rates and the tenure is usually shorter than that of personal loans. The interest rate on these loans can range from 10% to 20%, depending on the lender you choose.
A gold loan is a short-term loan, offered through a private bank or pawnshop. And personal loans are typically longer term, but with more flexible repayment options and lower interest rates than traditional credit cards.
Difference between Gold loan and Personal loan
- Gold loans are secured loans, meaning you need to pledge physical gold as collateral. This means that if you fail to repay the loan, the lender can use the gold (which is held in safekeeping by a third party) to recover their outstanding amount. This makes gold loans ideal for those who are risk-averse or who do not want to be forced into selling an investment asset at a loss in order to raise funds for early repayment of a non-gold loan.
A personal loan is a one-time loan for a specific purchase that has fixed payments over a set period of time. Personal loans are often unsecured, which means you don’t have to provide collateral; instead, your finances and job stability are used to determine the amount you can borrow and the interest rate you will pay.
- The interest rate plays a vital role in deciding which loan offer to opt for. As per the unsecured loan scenario, you will have to pay a higher rate of interest when compared to the secured one. Also, there are other factors like tenure and penalty charges which also decide an individual’s acceptance or rejection of these loans. Hence, this is not just about gold loan vs personal loan interest rates but factors such as affordability, risk involved and more should be looked into when making any decision.
Gold loan is a helpful way of getting instant funds for your personal or business use. With the growing gold prices, it has become an ideal asset class, especially from the religious point of view. Hence, gold loans are increasingly becoming popular in India.
- Personal loans could be used for a variety of purposes like debt consolidation, home renovation, medical expenses and other such personal needs. The repayment duration for a personal loan is longer than that of a credit card or home equity loan. If you have higher income and good creditworthiness, availing a personal loan might be an opportunity to make the best use of your money.
- Gold loans and personal loans are both easy to get, but they are not the same. Gold loan is a short-term loan that you can use either for business or personal purposes. On the contrary, personal loans are long-term loans that you can use to consolidate debt, pay off bill payments and expenses as well as make big purchases such as a car or home renovation.
So, the question of which is better, a gold loan or a personal loan, can be best answered based on the above parameters and your financial requirements. Of course, both have their own advantages and disadvantages. If you are going to take a gold loan or personal loan, then it is important that you know about the interest rates that these loans come with.
Muthoot Fincorp offers instant, hassle-free loans for your urgent needs. Apply for a loan today and enjoy flexible loan repayment plans, quick disbursal of funds, minimal documentation, and attractive Gold Loan interest rates. Full information is available on our website.