Gold Loan Vs Personal Loan

Gold Loan Vs Personal Loan: Which is Better?

Many readers ask me that which loan is better – A Gold loan or a personal loan? Well, it really depends. Most of the personal finance advisors say that gold loan is better than personal loans. Well, I do agree with them but for particular circumstances only.

Let me explain you How?

Most of the finance gurus say that gold loan is better than personal loans for two reasons.

 

01) Gold loans don’t require any Income proof or huge salary. Anyone who has gold can apply for the gold loan. While for taking a personal loan, you will need to submit lots of income proof and other required documents.

02) The second advantage of gold loan is – Low Interest rates. Gold Loan Interest rates are just 12-14% per annum. While personal loan interest rates can be higher than this.

Thus, because of the above two reasons, gurus advise to take a gold loan rather than personal loan.

But well, my opinion is little bit different. What my opinion is that, if you are going to finance the assets (Education, Business, Real Estate or any other Investment) out of your borrowed money than and only go for the gold loan, otherwise go for the personal loans if you are going to finance the liabilities (Tours & Travels, Car, Status items..etc..).

This is because in case of personal loans, if you will default than you will only damage your credit value with the lenders. But if you will default on gold loan than you will lose the control over this precious asset class.

So only go for gold loan if you are going to finance the assets. But if you are going to finance liabilities than go for the personal loans.

Remember, the smart people are those who use debt to finance the assets while the dumb people are those who use debt to finance the liabilities.