Which loan is better Emergency? Personal loan or Gold loan?

Personal loans are highly preferred for their versatile nature while gold loans are slightly specific in nature. However, on a ground level, both gold loan and personal loan have competitive interest rates within a range of 9.85%-26% and 10.75%-24% respectively. Quick approvals and disbursals are the determinants to choose a specific loan. Personal loans are believed to be authentic while a common perception remains that more gold is better! Below highlighted are the key determinants which essentially distinguishes between gold and personal loans:
  1. Amount of Personal Loan:
Gold loans can get you a higher amount as compared to a personal loan. The maximum threshold is different in case of gold loans which can go upto 1.5 crore, while for personal loans upto 40 lacs only. In emergency situations, gold loans can be your savior.
  1. CIBIL score:
Since, gold loans are backed by assets, the disbursement is quite seamless. The CIBIL score does not play a significant role here. On the flip side, personal loans are stricter depending fully on the credit score of the individual. In case of secure personal loans, borrowers let go of the assets when they fail to repay. Personal loans are quite fluctuating in nature and hence affects the interest rates. It’s not absurd to conclude that CIBIL score of the individual determines the loan amount, interest rate, tenure and other terms & conditions.
  1. Less documentation
Thankfully, gold loans do not involve extensive documentation. Just the basic documentation needs to be fulfilled. However, personal loans have long drawn process of initial approval and signoff. The basics cover the address proof and and ID proof for the start off. Many lending institutions provide extremely flexible interest rates depending on the loan type. Gold loans will keep changing the rates with the loan amount and tenure. Typical personal loans do not have a lot of flexibility in terms of interest and maturity value.
  1. Longer timeframe
 Personal loans have a relatively longer maturity period which is favorable from the repayment point of view. They have a tenure between 5-7 years, eventually reducing the final EMI. This is a good practice to enhance liquidity and reduce overall expenditure.
  1. Ease of Application
There’s no need for anyone to visit the bank branch physically. A gold loan can be easily considered in comparison to personal loans. No such formalities are required to be fulfilled for a gold loan. Financial marketplaces provide all kinds of personal loans anytime! So, it is better to have a fair evaluation and then take a fully informed decision! Also read: What’s an Medical Loan.

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