Gold Loan Vs Personal Loan—How to Choose Between The Two?
Short term financial emergencies drive many people to take loans so that they can satisfy their obligations. If you’re ever in this position, you’re probably thinking of taking a Personal Loan, which is not a bad choice. But, keep in mind, there is a better alternative to Personal Loans available to you.
Gold is a common investment in India. The ever-appreciating trends of gold prices make people invest their money in gold jewellery or coins. Once they make this investment though, it’s rarely liquidated in a hurry, and most households have gold heirlooms that are simply kept locked away.
If you possess gold and need cash immediately, then use it to take a gold loan instead of opting for a Personal Loan. While Personal Loan interest rates are generally high, gold loan interest rates are more reasonable, and you can avail other advantages as well.
Bajaj Finserv lets you borrow between INR 25,000 and INR 25 lakh on gold loans and doesn’t have any hidden prepayment charges.
Below are some of the advantages of gold loans and Personal Loans you should know.
Better Interest Rates
Gold loans have much lower interest rates compared to Personal Loans. This means that you’ll be paying smaller amounts as EMIs every month, which will put less stress on your finances.
The reason why gold loans have lower interest rates than Personal Loans is that the gold you give the bank is considered as security, or collateral, which they can auction to recover their money in case you default on the payments for any reason.
Because of this, when the bank lends you a gold loan, they are taking a lesser risk than when they lend you a Personal Loan. Lower risk for the bank translates to lower interest rates for you.
Shorter Loan Tenure
The tenure of Personal Loans can be anywhere between three to five years, which means that the burden of paying the EMIs will remain on your shoulders for this entire duration. Even though Personal Loan tenures are considered to be relatively short, gold loan tenures are shorter!
The maximum tenure for a gold loan is usually a year, although you can extend this if you want to. The advantage of a shorter tenure is that the task of paying the EMI will get over quickly, and you get your gold back once you pay off the loan.
Some banks will let you pay only the interest you accrue on the gold loan amount until the end of the loan tenure, after which you will need to pay off the principal amount.
This is a contrast to Personal Loans, as your monthly EMIs for Personal Loans always require you to pay both the interest and part of the principal amount. Clearly, gold loans put much less pressure on your finances.
Applying for a gold loan is also a less arduous and time-consuming process because it barely requires any documents. All you need i the gold, an identity proof, and an address proof that are recognised by the bank.When you apply for a Gold Loan with Bajaj Finserv, a representative will appear at your doorstep, collect the documents and the gold, and walk you through the whole process, making it much easier to obtain funds using your gold.
Personal Loan Perks
If you apply online for a Personal Loan with Bajaj Finserv, you will receive your loan approval in only 5 minutes, which is one advantage of obtaining a Personal Loan. Most lenders don’t give you the option to apply online for gold loan. The other advantage is that if you’re looking for a longer loan tenure, you can benefit more from taking a Personal Loan.
From these factors, we can clearly see that taking a gold loan is definitely more advantageous than a Personal Loan if you have gold with you. But if that’s not the case, then a Personal Loan can give you that much-needed help.