Credit Card Or Gold Loans: Which One Should You Opt?

Outlook Money

Emergency Situations

In emergency-like situations, like a sudden medical need, a wedding, or a job loss, one needs money urgently. In such cases, a Credit Card or a gold loan can be opted for.

Emergency Situations

Unsecured Type Of Loan

Among these two, a credit card loan is unsecured, while a gold loan is a secured form of credit.

Unsecured Loan

Credit Card VS Gold Loan

A cardholder with a credit card is allowed a certain credit limit each month and has to repay it on the due billing date. On the other hand, for gold loans, customers can access funds by weighing the value of their gold assets. 

Loans

Which Loan Is More Accessible

1. In the case of credit cards, banks have all the details of a customer, which include credit score, income, existing debt, etc. Depending on these details, banks either accept or reject a credit card loan. In the case of gold loans, there’s not much required from a customer in terms of eligibility.

Gold Loan

2. Interest Rates

The interest rates for gold loans range between 8 per cent to 26 per cent per annum, while in the case of credit cards, it’s much higher, between 18 per cent to 42 per cent.

Interest Rates

3. Value Of Gold Assets

When it comes to gold loans, the higher the value of your gold assets, the higher the loan amount. Whereas, credit cards offer instant access to funds but there are limitations when it comes to the credit limit.

Gold Jewelry

4. EMIs

Another aspect is that of EMIs. In the case of credit cards, EMI is put in credit cards as expenses. A delay or default in payment can lead to a debt trap.

EMI

Which One To Choose

The choice between the two depends on the borrower's financial situation, asset availability, and repayment capacity.

Loan