When it comes to securing financial assistance through loans, borrowers often contemplate between opting for a gold loan or a personal loan. Let’s delve into the significant disparities between these two borrowing options:
Loan Approval Process:
In the realm of personal loans, where collateral is absent, lenders meticulously assess applicants’ creditworthiness. Factors such as credit scores, monthly incomes, occupation profiles, and employer backgrounds are scrutinized. Conversely, gold loans, being fully secured by collateral, warrant a more relaxed evaluation process by lenders.
Difference in Interest Rates:
Interest rates for personal loans typically start at 10.5% per annum, contingent upon the applicant’s credit profile and the lender’s credit pricing policies. Meanwhile, interest rates for gold loans can fluctuate depending on the loan tenure, amount, and chosen repayment option.
Maximum Loan Amount:
Personal loans typically extend from Rs 50,000 to Rs 15 lakh, based primarily on the applicant’s repayment capacity and chosen loan tenure. Conversely, the amount granted for a gold loan hinges on the valuation of the gold collateral and the Loan-To-Value (LTV) ratio set by the lender, capped at 75% by the Reserve Bank of India (RBI).
Range of Loan Tenure:
Personal loans offer tenures ranging from one to five years, with a possibility of some lenders extending up to seven to eight years. Conversely, gold loans generally feature shorter repayment periods, typically up to three years, though some lenders may stretch it to four or five years.
Turnaround Time for Loan Disbursal:
Gold loans boast swift disbursal, often within a few hours of application submission. In contrast, personal loans may take two to seven working days for disbursal, although digital processes have expedited this timeframe, with some lenders offering same-day disbursement for pre-approved customers.
Choices of Repayment Options:
Gold loans offer a broader spectrum of repayment options, including servicing interest monthly while repaying the principal at maturity. Some lenders permit upfront payment of interest at loan initiation, deferring principal repayment. Conversely, personal loans are typically repaid via EMIs, though some lenders offer overdraft facilities, where borrowers pay monthly interest and manage principal repayments flexibly within a sanctioned credit limit.
Understanding these distinctions empowers borrowers to make informed decisions tailored to their financial needs and preferences. Whether opting for the security of gold-backed loans or the flexibility of personal loans, assessing individual circumstances ensures optimal borrowing outcomes.
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