The outbreak of the COVID-19 pandemic has led to many people's job and cut the salaries of many. They are facing financial problems. If you are facing a short-term liquidity crunch, both personal loans and gold loans can be worked out at this time. However, these two are different from each other in terms of loan costs, ease of access, impact on credit score, and repayment. Before choosing one, you should compare both options keeping in mind his needs. We are comparing for the ease of which you should choose from both.
Tenure:
Analysts say that if you are planning to repay your gold loan within the next year, a gold loan is the best option. But if you are planning to repay the loan in installments over a period of three to five years, a personal loan is a good option. Gold loans are usually given for a tenure of up to 2 years, and after that period, you can renew the loan.
Collateral:
In case of a gold loan, you have to keep gold (jewelry, bars, or coins in any form) as collateral. Banks offer up to 80% of the value of gold as a loan. In case of a personal loan, you need not give any collateral. The loan amount depends on your income and repayment capacity. If you have a regular source of income but no gold to keep as collateral, a personal loan is the only option for you.
Interest rate:
As a gold loan is a secured loan, the interest rate on it is less than the personal loan, but it is an unsecured loan. At present personal loan is available at interest rates between 10-15% based on your job profile and credit score. But gold loans can be taken at an interest rate between 8-12%.
Repayment:
In case of a gold loan, you get easy repayment options. You can either opt for an EMI option or opt for bullet repayment in case of a gold loan. Partial repayment is also available in case of a gold loan. But the only repayment option in case of personal loan is through EMI. If you want to pre-close your personal loan, the bank would have a pre-closure penalty of more than 5% GST.
Credit score:
To get a personal loan, you need to keep a CIBIL score of more than 750 (out of 900). Some banks give personal loans to people having CIBIL scores between 700 and 750, but they charge a much higher rate than these customers. But you don't need to have a good credit history to avail of a gold loan. But if your credit history is good, you can take a gold loan at cheaper rates.
Documents:
You should only have identity and address proof to avail the gold loan, but to avail the personal loan, you have to submit income proof with identity and address proof documents. Keeping the above points in mind, you can decide which loan (gold loan or personal loan) is best for you.
Read also: Here are some best investment options: Here you get secure and guaranteed return
How to get a loan against the car? Know here eligibility and documents
Know here how you can get maximum return on your PPF account
Image credit: financialexpress