Why is a Gold Loan Better than a Credit Card Loan?

Every individual has phases in life where the need for financial aid arises. The reason could be anything, whether it is needed to expand a business, make a major purchase, for educational expenses or something else. Contrary to common belief, taking a loan to meet your financial requirements can be a good move, given you choose the right type of loan.

Generally, people prefer using a credit card for their short term or long term financial requirements as it seems like the easiest way to arrange the required funds. To make it even more accessible, banks also offer instant loans on credit card. However, if it feels too easy, then there’s definitely a catch to it. That is why it is always ideal to read the fine print.

So, the big question is, ‘what is the alternative to a credit card loan when you need funds urgently?’

Well, you can go for a gold loan which is the best way to arrange the funds required.

The Indian Scenario

In a country like India where gold is considered more than just a precious metal and has a high sentimental value, every Indian household keeps a major part of their savings in the form of gold, whether it is in the form of gold coins or jewellery. In times of need, these family-owned gold assets can be pledged to borrow the required amount of money. This is exactly how a gold loan works. And, the way gold prices are skyrocketing; there can be no investment option as safe as buying gold ornaments as it comes with a guaranteed high ROI.

Why you should go for a gold loan instead of a credit card loan?

Given the inevitable attachment to the gold you own, liquidating your gold assets to fulfill your financial needs is the last thing you would want. But by applying for a gold loan, you only have to pledge your assets to obtain a loan and can get them back as soon as you repay the amount. In a way, you are making your gold work for you.

Here are a few reasons why a gold loan is a preferred option as compared to a credit card loan: -

Better Interest Rates

Gold loans are secured loans, so you can avail them at much lower interest rates compared to unsecured loans. The gold loan interest rate is usually lower due to the collateral involved. Credit card loans, on the other hand, are a type of unsecured loan which requires no collateral and comes with high interest rates.

If you are planning to apply for a gold loan, you can use this online gold loan interest rate calculator by Muthoot Finance.

Lower Processing Fee

The processing fee for applying for a gold loan is much lower as compared to a loan against your credit card, so it is undoubtedly a much better option.

No Credit History Required

Having a credit history is essential to applying for a credit card loan. And, for people with a lower credit score, it might be difficult to get the loan approved. On the other hand, an applicant does not require a credit history to apply for a gold loan as it is a secured loan. You can avail one even with a credit history which is not-so-good and also get some great loan offers depending on the amount of gold you are going to pledge. If you repay your gold loan on time, it helps to increase your credit score as well.

Suggested Read: Does Gold Loan Affect Your CIBIL Credit Score?

Loan Amount

There are a number of banks offering instant credit card loans and it might seem a good option at first, but the major drawback is the limited loan amount. While applying for a loan against your credit card, you cannot exceed your pre-decided credit limit. And when you exhaust that limit, it takes a toll on your credit score. On the other hand, there is no such re-decided limit in the case of a gold loan. You can instantly avail a loan of amount up to 75% of the value of the gold you are going to pledge.

Quick Disbursal

You might think of credit card loans as the fastest possible way to avail a loan but gold loans are even faster when it comes to loan approval and disbursal. You can avail a loan against your gold jewellery or other ornaments in less than an hour!

Flexibility

The best thing about gold loans is that they come with flexible repayment options. You can choose from a number of options for both tenure and repayment. In credit card loans, you do not get this much flexibility when it comes to repayment of the loan.

Muthoot Finance offers the best gold loans in India that come with hassle-free paperwork, quick disbursal, and attractive interest rates. Visit your nearest Muthoot Finance branch to know more.