Sometimes the cash at hand and in your savings account may fall short to meet the expenses that arise out of unexpected situations. Availing a quick loan is the a feasible option to tackle the financial crunch smoothly.
There are numerous types of loan available in the market; Personal Loan and the Gold loan are currently among the most popular options of loan for the people in such situations.
A loan that is taken to meet personal expenditures like medical bills, cost of higher education, expenses of wedding and etc. are deemed as a Personal Loan. The stability of sources of income, credit score, the absence of collateral and necessary documents are the crucial factors that are taken into consideration while approving an applicant’s plea of a personal loan. Personal Loans often have a thorough process of documentation and charge a high rate of interest on the loan amount.
Do you know India happens to be the biggest consumer of Gold in the world? Though our country consumes gold more than others, it fails to utilise its reserve in its favour.
Most would argue that to meet an unforeseen financial expense within a few hours and at a lower rate of interest, a person should apply for a gold loan. Unlike personal loans, a gold loan requires collateral of gold and the amount sanctioned to the borrower by the lending institution is entirely dependent on the value of the gold. The applicant’s credit score and income are not very crucial in the process of availing a gold loan. The borrower of a gold loan has to pay only interest on the loan’s term-period and no additional charges are levied on the pre-payment of the loan.
Since both Personal loan and Gold loan provides quick disbursal at competitive, borrowers are often confused between the two.
Take a look at the table below to judge their differences at a glance.
|Personal loan||Gold Loan|
|A guarantor is required to avail a loan amount||The loan amount is availed against the security of gold|
|The loan amount is decided on the basis of the applicant’s previous repayment records and credit scores||Borrowers can avail an amount up to 60-75% of the gold value|
|Interest rate of 16% – 22%||Interest rate of 12% -24%|
|Somewhat lengthy processing of the loan owing to thorough paperwork||Fast processing of the loan owing to minimal documentation|
|The processing fee of around 0.5-1% of the loan amount||Zero or very insignificant processing fee|
|2% of the principal amount on any Equated Monthly Instalment (EMI) paid in advance||Zero or insignificant prepayments charges|
|EMI mode of payment is accepted||Interest on the loan amount for the loan period is charged for the loan closure|
Always go through the terms and conditions of a loan before applying for it. Make sure to choose the personal loan that is most suitable for you and your financial requirement.