The choice between a personal loan and gold loan depends upon your requirement. A gold loan is a good option if you need a substantial amount of money for a short duration and your credit score is poor. A personal loan offers the convenience of purchase, longer tenor and comfortable EMIs.
Personal loans and gold loans are convenient financing options to choose from when you need money at short notice. Both gold loans and personal loans offer competitive and comparable interest rates. The procedure for obtaining personal loans and gold loans is simple and quick.
The factors that you need to consider while making a choice between a personal loan and a gold loan are as follows:
- The amount of the loan
Gold loan is a secured loan and helps you get larger loan amounts, provided you have an adequate amount of gold to pledge. The maximum credit limit on gold loans is as high as Rs.1.5 crore. A personal loan is an unsecured loan and the maximum amount that you can avail as the personal loan is capped at Rs.40 lakhs.
- Credit score
Since the gold loan is a secured loan, the credit score of the applicant does not have any significance while analyzing his eligibility for the loan. In case of default in repaying the borrowed amount, the lender can recover the loan amount by selling off the gold that has been pledged as security. However, in case the loan amount is very high, the credit score of the applicant may be considered.
Being a collateral-free loan, personal loan eligibility criteria is heavily dependent on the credit score of the applicant. The personal loan interest rate, tenor and service conditions depend on the applicant’s creditworthiness and his ability to repay. A person with poor credit score may find it difficult to avail a personal loan or may get one at stringent terms.
The maximum tenor that you can get in a gold loan is 3 years. The maximum tenor for a personal loan is 5 years and can be extended to 7 years in certain cases. A longer tenor will help you to reduce the EMIs and make it more comfortable for you to repay the loan. Though gold loans offer flexibilities in terms of repayment, the amount of EMI tends to be high due to the shorter tenor.
When you apply for a gold loan, you need to visit the lender’s office in order to submit the gold and get it evaluated. The loan will be approved only after the valuation process and the parity check. People residing in rural areas or in semi-urban areas may find it difficult to locate a branch in their vicinity.
Personal loans can be availed online, making it very convenient for the applicant. You can make comparisons between the personal loan interest rates offer by different lenders and choose one which is most suitable for you.
How to apply for a personal loan
Once you have chosen a suitable personal loan, you can log into the website of the lender and check your eligibility and documentation requirements. After that, you need to fill in the application form online and submit it. You can request for a pickup of the relevant documents. Verification of the application process happens within 24 hours. Once the loan is approved, the amount is directly credited into your bank account.