Gold Loan Vs Personal Loan - Which is Better?

 With gold prices sharing such mixed market signals,  it has to be said that now could be the best time to avail a loan against gold. It is generally seen that getting a gold loan fares way better than getting the other alternative to it - personal loan. Sceptical? Well, Let’s see how a loan against gold works better than a personal loan, taking into consideration all their pros and cons.

Paperwork for personal loans is not very elaborate, as long as basic eligibility parameters are met and KYC documents are furnished. While it is true that there are few financial products that can match the  versatility and flexibility of  personal loans, the emergence of secured gold loans bodes well for the loan scape, especially under the current circumstances that warrant an unstable employment scene.

That being said, both forms of loans have a number of pros and cons to be taken into consideration in some detail before coming to a verdict on which one might be better. Read on to learn more on how the gold loan product differs from a personal loan, with all their drawbacks and advantages accounted for.
Personal Loans

A personal loan is unsecured, which means that it does not need you to pledge any asset/property (business or personal) in order to get the amount. One can get a personal loan and utilise it for a number of personal or professional requirements - to fund a wedding, getting household appliances, tackling a medical emergency, funding children’s higher education, consolidating past debts, or even going on a trip abroad!

The eligibility criteria, which is often what makes or makes or breaks the deal in case of personal loans,  incorporates numerous factors. This can include a good credit history (generally with a credit score of 700 or higher), the applicant’s age and employment status, regular monthly income, etc.

In further detail, let’s take a look for pros and cons of what a personal loan brings to the table:
The Pros of Personal Loans

- Collateral Free: If someone wants to take out a personal loan, they wouldn't have to lay down any of their personal or business assets as collateral. This makes personal loans more accessible to those who have no security to offer, but do have a regular source of income.

- Versatile: The scope of personal loans is really helpful to borrowers, as it can be used for any kind of fiscal need at an individual level. This can include consolidating past debts, paying for weddings or other big-ticket expenditure, and more.

- Simple documentation: The paperwork for availing a personal loan is quite easy, needing you to furnish your KYC documents and meet basic eligibility parameters.

- Funds Quickly Disbursed : Funds are approved and disbursal quite quickly, with many lenders crediting the amount to your account within 24-48 hours.
The Cons of Personal Loans

- Strict prerequisites (credit score and credit history): Since personal loans are not secured by collateral, banks need to be thoroughly assured of the borrower’s repayment capacity before approving a loan. For this reason, banks undertake stringent perusal of your credit management history  and present credit score to deduce your financial capability.

- Higher interest rates: As they are unsecured, lenders assess personal loans to be riskier options as against loans with security. So, personal loans draw comparatively higher rates of interest.

- Processing Fees: Since personal loans are provided without collateral security, banks are required to invest in scrutinising your income and credit history. Hence, they will charge you an additional processing fee, which can be upto 1% of the loan amount.