Meeting the sudden cash requirement can be tricky at times but in situations like this people tend to look to explore their option of loans. For most, the search boils down to a choice between a personal loan or a gold loan to meet their cash demands. While both the option have their own features that make it an attractive option, here, we try to list the things that you should analyze and compare before making the final choice.
Interest rate options available on personal loans depends a lot on the applicant’s profile and his past credit score. A better credit score means that you might be able to get a bigger loan and a lower interest rate. generally, the interest rate charged on personal loans ranges from 10 to per cent per annum. However, depending upon the risk assessment of the applicant’s profile after considering loan amount, tenure and repayment options; the rates can also range from 7 to 29 per cent p.a.
For gold loans, the interest rates for people with poor credit profiles are generally lower than the personal loan options. However, when it comes to applicants with good profiles, the difference between the rates of both loan options may not be significant.
Again, a lot depends on the applicant’s credit profile in case of the loan amount approval. Banks and financial institutes offer personal loans ranging between Rs 50,000 to Rs 15 lakh. However, some lenders claim a disbursal of a higher amount of up to Rs 40 lakh.
In the case of gold loans, the amount depends on the valuation of the gold deposited as collateral and the lender’s loan-to-value (LTV). While the amount of approval can vary, RBI has set a 75 per cent bar on the gold loan LTV ratio.
In the case of pre-approved personal loans, some lenders claim same day disbursal of the loan amount, however, personal loan disbursal usually can take up to 5 to 7 days.
In contrast, gold loans are the quickest and are generally disbursed within hours of submitting the application.
Processing fees is another that should be kept in mind while making a choice between the loan options. While in the case of gold loans, the general trend is of a processing fee of up to 2 per cent of the loan amount, some lenders also offer loans with a flat processing fee as low as Rs 10 onwards.For personal loan processing, the amount can range between 1 to 3 per cent of the loan amount.
In case of repayment, personal offer a longer duration when compared to gold loans. While generally, the repayment tenure of a personal loan can vary between 1 to 5 years, in some cases it can even go to up to 7 years.
Meanwhile, gold loans come with a repayment tenure of only up to 3 years. though some lenders also offer repayment tenure around 4-5 years.