People running short of funds often look for gold or personal loans in India. It is precisely between these two options that people get confused. Although, based on common knowledge it would be said that gold loans are better but upon a better look you will realise that it is not the case. Personal loan in India provides many benefits and advantages which gold loans fall short of.
It is, therefore, important to know where a personal loan trumps gold loan.
If you are looking for a loan option, here are the 8 reasons why the option of personal loan in India should be preferred over getting a gold loan.
8 Top Reasons Why Personal Loans are Preferred Over Gold Loans in India
1. Unsecured Loan:
The most distinguishing factor between a personal loan and gold loan is that a personal loan is a form of the unsecured loan whereas a gold loan is a secured loan. In simple terms, what this means is that for a personal loan in India you do not have to place any of your assets as collateral. Whereas in the case of a gold loan, as the name suggests, you will have to deposit your gold as collateral for the loan to be processed.
With minimal paperwork in personal loan, money can be borrowed without a mortgage
What this implies is that any person with an income can apply for a personal loan while he must have a gold reserve to get the gold loan.
2. Better Ratio:
Depending on what your salary or monthly income is a credit limit is set for you. This limit is always higher than that of your income. So the benefit of getting a personal loan in India is that you can get a sum larger than your salary.
On the other hand, in a gold loan, you get a maximum amount of 75-80% on your gold deposits. The rest 20-25% is kept as security in the scenario of you not being able to pay the loan. So, the net worth of your asset is always more in gold loan than the amount you can borrow from it.
Hence, it becomes a major limitation that you can only get less than what you already have, that too on interest. Clearly, personal loan turns out to be a better alternative in this case.
3. Not A Compromise:
Putting gold as collateral has never been looked upon in a positive way in Indian tradition. This is because gold symbolises prosperity and Indian families prefer to preserve it rather than using it as collateral. And if you have to use it to get a loan it rather indicates that you are in a dire financial strait.
The option of a personal loan gives a much better outlook. Since you do not have to put any asset as collateral here, it does not give the impression of you facing a financial crisis.
So, even if you have a gold reserve, it will cast a much better impression upon your personality if you opt for a personal loan in India.
4. Higher Credit Limit:
Personal loan offers you the benefit of a much higher credit limit than that of a gold loan. You can get the maximum amount of Rs. 25 lakh as a personal loan in India. This enables you to plan bigger things in advance.
A gold loan, on the other hand, will give a rather small amount in comparison to a personal loan. Since you get the amount on the basis of your gold reserve, it does not give you the scope of getting a larger sum in advance.
5. Multiple Usages:
Since the loan amount in the personal loan is higher. you can use it for multiple purposes. A personal loan can even be used for more than one purpose at a time. For instance, you can take a personal loan in India to pay your credit card dues and at the same time use the rest of the amount for travelling.
In the case of gold loans, this is not possible. Since the amount to be had itself cannot be much, the question of multiple uses will seem far fetched here. At best, you can use the amount of gold loan to pay your dues.
6. Flexible Tenure:
Personal loan offers a much flexible tenure than that of a gold loan. You can get the repayment period as high as 5 years on a personal loan whereas it is only 3 years in the case of gold loans.
7. Credit Score:
An interesting thing about the credit score is that the higher it gets the better your chances of getting the best offers. If you take a loan and pay it on time your credit score will increase. A good credit score will imply that you can get further loans in the future at the best interest rates.
Personal loan offers a better opportunity to increase your credit score as you can choose a more flexible tenure to pay the loan. For more information on personal loan and how to get one click here.
- No Forfeiture: Since you are not putting any asset as collateral, the risk of losing it is also absent. But if you fail to pay the gold loan or its interest on time, the lending institution can liquidate your gold to recover their loss.
Getting a personal loan in India, thus, has many advantages over a gold loan. You can easily apply for the loan anytime you want without needing to risk any asset. Whether it is for travelling, wedding, education or medical expenses, a personal loan can assist you in all scenarios.
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