Gold Loan Vs Loan Against Credit Card: Which One Is for You?

May 29, 2020

There come many situations in life when a loan becomes the only financial option. Borrowing money can be a useful way to get funds in times of emergencies like a sudden hospitalization or an unexpected business failure.

Gold loans are a viable option to get funds if you have enough jewellery or other gold assets. Gold loans are secured loans that are sanctioned against gold jewellery retained as collateral by the issuer.

Another option that exists for quick, hassle-free loans are loans against credit cards. These are different from using a credit card itself. Loans against credit cards are cash loans as opposed to getting an increased balance on your credit card.

What is a Loan Against Credit Card?

Think of a loan against credit card as a sort of personal loan. It is an unsecured loan, meaning there is no requirement for collateral, and it comes for a specific period of time at a set interest rate. Here are the most common features of a personal loan on credit card:

  1. Credit Card Holder – For a personal loan on credit card, it is necessary for the borrowing individual to own a credit card. Both old and new credit card owners are usually eligible for this loan.
  2. Credit Score – Since these are unsecured loans, a borrower’s credit history and score play an important role in loan sanctioning. Any history of defaults or late payments can impact whether you get the loan as well as the rate at which it is sanctioned.
  3. Amount – The amount of loan against credit cards issued is usually within the credit limit of your card. Some banks may offer higher loan amounts, depending on certain other factors like your credit history or income levels. The amount is much higher than the cash withdrawal limit on credit cards.
  4. Interest Rates – Compared to the interest on swiping your credit card, the interest rate for a personal loan on credit cards is usually much lower, typically starting at 12% per annum.
  5. Minimum Documentation – A key feature of loans against credit cards is that they have minimal to no documentation requirements. Since all necessary documents are already obtained at the time of a credit card sanction, only follow-up or expired documents may be needed.

This type of loan is quite popular because of its advantages and ease. Online credit card loans are also widely available, making it a convenient option for many borrowers.

Differences Between Gold Loans and Loans Against Credit Cards

While both gold loans and loans against credit cards are useful borrowing options in times of emergencies, given their quick disbursal times, convenient application process and flexibility, there are some key differences between the two. Here are the aspects you need to consider before you apply for a loan:

Feature Gold Loan Personal Loan on Credit Card
Collateral Gold loans are secured loans offered against gold assets pledged as collateral Loans against credit cards are unsecured, personal loans that do not need any security
Loan Amount The loan amount issued is usually a certain percentage of the market value of the gold assets pledged, and is usually quite high Loan amount is usually within the credit card limit, although some banks may offer a higher amount
Interest Rates Since gold loans are secured loans, interest rates are low, usually starting at an average of 10.68%, making them affordable options These loans usually carry a high rate of interest because they are not backed by an asset, typically starting at 12% per annum.
Tenure Usually, gold loans are not offered for a period of longer than 3 years 12 months Personal loan on credit cards is generally offered for 24 months, though some banks may offer longer tenures
Other Requirements Apart from gold collateral and KYC documents, there are no pertinent requirements Applicant will require a credit card, a good credit history and strong income levels to prove repayment capacity

What Should You Choose?

Since gold loans offer more benefits compared to a loan against a credit card, they are the better option to choose. While both types of credit make borrowing simple, fast and convenient, gold loans are accessible to anyone with gold assets, irrespective of their employment status, income levels or credit history.

Gold loans also offer lower interest rates in comparison. Unlike online credit card loans, gold loans do not pose the issue of limitations on cash withdrawal, which can become a hindrance. Instead, gold loans offer high per gram rates to offer the best values. A gold loan calculator can help demonstrate this.

Rupeek’s online gold loans are revolutionizing the borrowing experience for customers, with high loan-to-value ratios, low interest rates and 24-hour disbursals. Apply for a gold loan with Rupeek and get a loan that will be completely hassle-free.