Everyone needs financial help from time to time. There should be no shame in finding the loan option to get that help. However, there are many loan options for him and you may find it difficult to make the right decision. Like Gold Loan Vs. Can't decide to take a personal loan.
Gold Loan vs Personal Loan
Everyone who takes a loan usually uses Gold Loan and Personal Loan for emergency cash. Here through this article an attempt has been made to provide a comprehensive comparison of Personal Loan & Gold Loan so that you can take the right decision. And you can decide well whether to take Gold Loan or Personal Loan.Gold Loan
Gold Loan is known by its other name You will get a better idea of what Gold Loan is “Loan against Gold”. Essentially, the borrower puts up their gold jeweler and is given a percentage of the piece's value as the loan amount, called a secured loan. The borrower pays monthly installments until the loan is repaid, and the lender returns the deposited gold at the end of the loan.Personal Loan
A Personal Loan (such as a signature loan) also works in the same way as a Gold Loan, except that it is an unsecured loan, i.e. it is without the benefit of collateral. This loan can be obtained without putting anything to guarantee repayment. It becomes difficult for the loan applicant to get this loan approved.During the application process for both the above loans, the Loan Agent or Loan Provider will check the credit profile of the applicant. But it is usually not a factor for sanctioning Gold Loan.
Gold Loan vs Personal Loan Full Detail
You have many options when you decide to take out a loan. Which is often confusing. Here is detailed information about which loan to take from Gold Loan Vs Personal Loan . Which are as follows.Interest Rates – Interest rate
Loan Providers charge higher interest rates according to the loan payments. For example, Gold Loans have higher repayments than Personal Loans or other unsecured loans, so their interest rates skyrocket.On an average, Gold Loan Interest Rate can vary between 7.5% to 29%. In contrast, Personal Loan Interest Rate ranges from 9% to 24%. However, risk assessment plays a large part in the interest rate for the loan. Gold Loans have low interest rates as they are secured loans; The borrower puts up collateral to reduce their risk of non-payment. At the same time, the interest cost on a personal loan will ultimately be higher due to its unsecured nature.
Loan Tenure – Term of loan
The loan tenure is the time period that the lender gives the borrower to repay the loan. Personal Loan has a tenure of one to five years, while Gold Loan offers a tenure as short as three years to seven days depending on the loan amount.While higher loan terms give you room to take longer to pay off your debt, it also allows time to accrue interest, which increases the overall amount you owe. A short loan term offered by Gold Loan can be stressful, especially if you get a loan with a high interest rate. But for borrowers confident that they can repay their loan in a short time, a short tenure Gold Loan can prove to be a more cost-effective option in the long run.
Repayment Options – Payment options
Personal Loan and Gold Loan will allow the borrower to avoid most of the hurdles of repaying their loan with EMI (equal monthly installments). It is a fixed monthly income repayment period agreed upon by the borrower and lender ahead of time; However, Gold Loans have more flexible repayment options. They accommodate customers better because secured loans guarantee timely repayment.For example, some Gold Loans have an interest-only option that allows them to pay interest until the maturity date, at which point they start repaying the principal amount. Another repayment option is to prepay the interest, leaving borrowers to pay only the principal at the end of the loan term.
For the best chance of repaying your loan, Gold Loan offers options to increase your repayment capacity.
Processing Time – Processing time
Loan applicants will apply for Gold Loan or Personal Loan during financial difficulties as lenders can process them in less time. However, they have to submit the required documents (like income proof, residence proof etc.) along with the loan application. While it is a long process in itself, Gold Loan handles disbursement of funds more efficiently than Personal Loan.When applying for an average personal loan, the lender will check your credit score in several ways to see if you are able to repay the loan and determine your personal loan category. Getting a business loan involves additional steps where the loan-to-value ratio will determine whether your company is worth the financial risk. As the Personal Loan approval process is more extensive, it usually takes around 2 – 7 days to disburse your money. Few lenders (save for illegal lenders) will approve a loan if the borrower has a poor credit profile.
Unlike a personal loan, while applying for a gold loan, the lender will check the authenticity of the gold you have pledged and decide your loan amount eligibility from that without your credit score coming into the process. So if you are in serious financial trouble, have gold lying around and have a poor credit history, Gold Loan will be your best bet to get a large loan amount in the shortest possible time.
Processing Fee – Processing fee
While lenders will usually disburse Gold Loans to borrowers as quickly as possible, this comes with a lot of processing fees that you have to pay before you get your money. While Personal Loans have these fees, they are usually limited to service fees, insurance and processing charges.On the other hand, with a Gold Loan, you have to pay typical processing fees plus extras like gold valuation fee (charged based on the current gold value), administrative costs, documentation fees and more. Factoring in those additional costs will allow you to more accurately determine the actual cost of applying for a Gold Loan or Personal Loan and make a better choice for your financial situation.
