Personal loans and gold loans both are aimed to provide financial support during times of need. Further, the market of loans and lenders have taken a hike admits the pandemic situation as people needed finances and capital. Further Bajaj Finance gold loan, as well as personal loans, are suitable and the amount of the credit is customizable up to an extent.
Let’s take a look at the three types of loans that are available in the market including their pros and cons:
Gold loans- a gold loan is a secured type of loan which comes along with the collateral value that provides a security guarantee. One is generally able to avail 75% of the gold value as a loan but due to current circumstances, RBI has increased the loan to value ratio up to 90%. Further rate of interest charged on gold loans accounts within 10% to a maximum of 16%.
Further, we will take a look at the pros and cons of a gold loan:
Pros-
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Gold loans have a fast approval procedure that attracts more clients.
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Gold loans come with flexible repayment tenure where the tenure period can be set according to one’s compatibility.
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It provides a lower rate of interest as compared to personal loans and credit cards.
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There are various options for repayment as well. One can opt for the monthly EMI option, foreclosure of account, even monthly payment of interest is accepted as the principal amount is provided during maturity.
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There is no need for a credit score as it is a secured loan and the lender provides a credit based on the value of gold.
Cons-
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On the other hand, the repayment tenure is very short and has a maximum period of 1 year, regardless of the loan amount.
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It is valid only to people having gold assets, while poor people without much gold may not be able to access this facility.
Personal loans-
Personal loans are a type of unsecured loans that grant no collateral value and provides a credit based on repayment eligibility and credit score. Further, it has a higher interest rate as compared to gold loans as it charges around 16% to 27% interest rate on the principal amount. Although it is said to be convenient people can not avail of this loan if not proved to be creditworthy.
Let’s take a look at the pros and cons that come along with the features of this loan:
Pros-
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This loan comes with no security guarantee, which means there is no need for providing collateral. Thus it could come in handy for people looking for loans without the need of mortgaging valuables.
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It comes with a longer period of tenure with a maximum period of 3 years within which one has to pay back the loan amount.
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Personal loans do not need any guarantor as they are a type of unsecured loan.
Cons-
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It comes with a high-interest rate as compared to that of a gold loan.
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It has an impact on the individual as it comes with more anxiety and burdens thinking about the consequences of not being able to repay the loan or even a late repayment can lower one’s credit score.
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A person has to have a credit score of around 800 or more to get a personal loan approved. As this loan does not have a security guarantee like in gold loans thus the lenders check the credit score to see if the client is worthy of the credit or not.
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It also has a high EMI rate as compared to gold loans.
As per the comparison made between gold loans and personal loans it might have been a little easier for you to differentiate amongst these. This information might help you in times of need while selecting between a personal loan and a gold loan. Further, you can choose whatever suits your situation.
