Which Loan is better in emergency, Personal loan or Gold loan?Have you ever wondered which loan can support you best at the time of emergency? Although both are financial products and provide convenient financing options when you need money at the time of emergency. But while applying for a Personal loan or Gold loan, you may come across different interest rates, charges and fees.
Numerous financial institutions and NBFCs offer personal loans as well as gold loans to the borrowers with different financial requirements. However, to decide which loan is better, you need to go through the following advantages and disadvantages of a personal loan and gold loan before applying for it:
What is a personal loan?
A personal loan is an unsecured loan and comes collateral-free, which means it does not require any security and is easily available for various purposes like home renovation, wedding, education, consumer durable, medical emergency and for many more objectives:
- A personal loan can be a better choice for a longer tenure and higher loan amount.
- The personal loan interest rate is fixed and is much higher than other loans, due to the risk involved about the repayment capacity of the borrower.
- Since personal loans are unsecured loan lender will look at your financial stability to make sure you are able to repay the loan on time.
- Personal loans are quick and disbursed within 24 hours or minutes directly into your account after the verification process is done.
- Personal loans are flexible in nature and the loan amount, tenure & EMI can be customized with the help of a loan EMI calculator to plan a monthly budget.
- Minimal documentation in a paperless format is required that includes your Aadhar Card & Pan Card unique number.
- A good credit score is your gain for getting a fast and lower interest rate on personal loans.
What is a gold loan?
A gold loan is a secured loan taken by the borrower from the lender by pledging their gold assets as a security against the loan.
- A gold loan has a fixed interest rate and does not fluctuate throughout the repayment schedule like a personal loan.
- The gold loan has a flexible repayment option like a personal loan
- The gold jewelry should range within 18-24 carats.
- The loan amount provided is a certain percentage of gold, typically up to 75% based on the current value and the quality of the gold.
- A gold loan can be a better choice if you can repay the loan within a shorter duration and also implies a lower interest rate. It is a good option for short-term money requirements or to support emergency situations.
- A gold loan should be considered if you have a low credit score as lenders do not check your credit score in the case of gold loans, whereas, lenders charge a higher rate of interest on a personal loan with a low credit score.
- If you fail to repay the gold loan or interest rate on time, the lender will liquidate your gold to recover the loan.
Hence, with the above advantages and disadvantages of a Gold loan and personal loan you can decide and plan which will be better in time of emergency as per your requirement and convenience.