What should I choose? Gold loan vs Instant loan

Updated on: 7 September 2023

Published on: 28 June 2021

Instant gold loans and personal loans are both common and popular credit options that many rely on. Although both are easily available, you should know a few crucial aspects when comparing a gold loan vs personal loan.

This information will enable you to easily choose a feasible option and meet your requirements. Read on to know more about gold loans and personal loans to make an informed decision. 

What is an Instant Personal Loan?

Previously, the time taken to process a loan application made it difficult to procure loans during emergencies. But now, thanks to fintech advancements, credit options have become more accessible. Today, you can easily apply for a personal loan and get the funding you need in a matter of hours. 

A significant benefit of these loans is that there are no end-use restrictions. As such, you can get a loan for medical emergencies, purchasing assets, wedding preparations, travel expenses and other such expenses. Moreover, these loans are usually collateral-free and don’t require a lot of documents from your end. 

The entire process is also highly convenient and minimalistic. You can apply for instant personal loans through an entirely digital process, eliminating the need to visit the bank or fill out multiple forms. As such, the disbursement often happens instantly.

What is a Gold Loan?

In India, gold holds great cultural and traditional significance. In addition to this, it is a great investment instrument for multiple reasons. One of them is that you can easily leverage it to get access to instant cash.

An instant gold loan, being a secure credit option, has many advantages as long as you have sufficient gold. The whole process of procuring a gold loan is similar to other secured loans. First, you present all the gold loan documents and assets to the lender. After evaluating the gold articles and submitted documents, the lender sanctions a loan amount. The loan agreement will require you to pay off the principal amount with interest to get back your gold.

Remember, the loan amount depends on a certain percentage of the gold’s value. Factors like the gold’s purity also affect the loan amount. Unlike other secured loans like car or home loans, there aren’t any restrictions applied on the usage of gold loans. 

Moreover, you can apply for an instant gold loan even if you don’t have an excellent credit score. This is because it is a secure option that lowers the lender’s risk, making them less hesitant to offer the required funding. 

Generally, the gold loan documents that you need to submit are also quite basic. The majority of the lenders ask for identity proof and other standard proof about the gold asset. As such, a gold loan is fairly easy to apply for and quick to get.

Features of an Instant Personal Loan

One significant feature of an instant loan is that you can apply digitally through an entirely paperless process. You can upload all your documents online. Moreover, if you have preapproval, you will have to submit minimal documents or none at all. 

The processing time is also significantly lesser for these loans compared to traditional loans. This can also help you get prompt approval and disbursement as the lender need not spend time verifying your asset. 

You can also choose a flexible tenure and have a comfortable repayment experience. Also, if you have a good credit score, you are eligible for lower interest rates. Thus, the instant loan’s overall cost will be easier to repay. That being said, an unsecured loan comes at a higher interest rate as compared to a secured loan.

Features of a Gold Loan

One feature of an instant gold loan is that you can get lower interest rates than other unsecured loans. The interest levied on gold loans varies from lender to lender. A bank may charge lower interest rates compared to an NBFC. 

Moreover, you can choose a flexible gold loan tenure and repay the loan without any financial strain, ensuring the security of your asset. Depending on your situation, the lender may allow you to extend the repayment timeline in case you are finding it hard to repay.

Lastly, the application process for this loan is also simple and quick. You can apply via the lender’s website or visit their branch. However, the approval and disbursement may take time since the lender has to verify the gold loan documents and assets you pledge as security.

Eligibility Criteria

When assessing a gold loan vs a personal loan, pay attention to the eligibility terms. Here is a look at how the eligibility criteria differ for both loans. 

For Instant Loans

Taking Fibe’s eligibility criteria for instant loans as an example, you are eligible for one even without a credit score. To apply for Fibe Instant Personal Loan, you must: 

• Be between the age of 21 years and 55 years
• Be an Indian resident
• Have a monthly salary of ₹15,000 if you live in a non-metropolitan city
• Have a monthly salary of ₹18,000 if you live in a metropolitan city

If you meet the above eligibility requirements, you can apply for an instant loan on our website or personal loan app. 

Also Read: How to get personal loan on aadhar card

For Gold Loans

The gold loan eligibility criteria are usually simpler than an instant personal loan, as anyone with gold can apply. Here are the general eligibility criteria set by the majority of lenders:

• You must be an Indian resident
• You must be a salaried employee or self-employed
• Business owners, housewives, and farmers can also apply

Remember, anyone with sufficient gold is eligible for a gold loan with any reputable lender. Moreover, you can get a gold loan even with a low credit score. However, remember that the gold loan process will involve physically handing over your gold to the lender. If you fail to repay the loan, the lender can seize your asset to recover the loan amount. As such, gold loans have a higher risk when compared to instant personal loans.

To conclude, if you are not a salaried person and have some physical gold at hand, getting a gold loan might be the best option for you. However, if you have no credit score and want instant funds without providing assets as collateral, you should get an instant loan from lenders like Fibe.

Fibe is a user-friendly Instant Personal Loan provider, offering funding of up to ₹5 lakhs. With an alternate scoring mechanism, even borrowers who are new to credit can get loans easily. You only have to upload basic documents like ID proof, address proof, and income proof to procure a loan. If you meet the eligibility criteria, you can get loans for travel, instant cash, education, and more. Download the Fibe Personal Loan App or register on the website to apply.

FAQs on Gold Loan vs Instant Loan

Which loan is better, a gold or personal loan?

Choosing between a gold or personal loan depends on your eligibility and financial requirements. If you don’t want to risk your assets, you can get instant personal loans of up to ₹5 lakhs from Fibe. 

Is it good to buy gold with a personal loan?

Personal loans are a great option to finance your gold purchase. However, it is wise to do your research before investing, as gold prices fluctuate as per market conditions.   

What are the disadvantages of gold loans?

One disadvantage of gold is that your borrowing capacity is linked with the market price of the gold. This means that you may get a lower loan amount if the price of the yellow metal plunges. 

What is the interest rate on a gold loan vs a personal loan?

The interest rate for gold loans and personal loans depends on the lender you choose and your eligibility. However, secured loans generally have a lower interest rate as compared to unsecured loans.

Does a gold loan affect the CIBIL score?

Yes, your CIBIL score depends on numerous factors, of which loans, both secured and unsecured ones, are the most significant factor. As such, if you miss your gold loan EMIs, then it can negatively affect your CIBIL score and vice versa.