It is really hard to keep your calm when you are struggling with cash availability. No matter the reason, the feeling of being broke can leave you feeling helpless. And, on top of that if a financial emergency arises, well, the situation becomes more twisted; leaving you frustrated.
Thankfully, with the advent of new technology, taking a loan from banks has become much easier. It has not only made the process lightning fast, catering to your needs immediately as and when needed, but technology also allows you to keep your financial situation private and personal.
In light of this, if you are confused between the two popular loan options, i.e. gold v/s personal loan, this article will help you make an informed decision.
While both these loan types have their own set of advantages and disadvantages, personal loans are worth considering in terms of practicality and easing your financial situation.
Let us give you real-life examples to help you understand why we strongly recommend taking personal loans over gold loans:
Two friends, Alia and Amit were in urgent need of cash for their own reasons. Alia decided to go for a gold loan while Amit opted for a personal loan. Here is a comparison chart between both of their loan terms:
Alia’s Case (Gold Loan):
- Ease of Process: Alia can easily get a loan by collateralizing her gold ornaments. The process requires minimal documentation. However, she may have to wait for upto 2 to 3 days for verification of her submitted documents and gold collateral. Once approved, the loan amount will be disbursed in her bank account within a few hours.
- Limitation on Loan Amount: The loan amount that Alia is eligible to get depends on the percentage of purity and market value of the gold she submits as collateral.
- CIBIL score: This will impact a gold loan to some extent. A less than perfect score could work for you.
- Margin: Alia can receive only 70%* of the current value of the gold submitted by her. In some rare cases, depending upon the individual bank’s policies and offers, she may get upto 90%* of value as a gold loan.
- Asset at Risk: Since gold loans are secured loans, Alia risks losing her gold ornaments in case of default. The loan tenure for a gold loan is limited to a year. If she is unable able to pay the amount within this period, then the bank has the freedom to auction her gold.
- Tenure: Alia is required to repay the entire borrowed amount within a maximum tenure of 12 months. She has to adjust her budget as per her repayment terms rather than adjusting her repayment term as per her budget.
Amit’s case (Personal Loan):
- Ease of Process: Amit can easily apply for a personal loan online from the comfort of his home. He can easily check his eligibility on the basis of his salary and minimal paperwork within no more than 5 minutes. Once approved, the loan amount will be disbursed in his bank account within 24-48* working hours.
- Limitation on Loan Amount: Amit has a good credit report and thus, can avail any amount within his repayment capacity. All he has to do is fill up the details related to his income and credit history to get a direct quote on his eligible loan amount.
CIBIL score: It is critical to have a good CIBIL score to get a personal loan.
- Margin: Amit has to pay a minimal one-time processing fee and can use the rest of the availed amount as he wishes. For instance, most banks offer a personal loan of upto INR 20 lakh for a processing fee of 0.99 to 2.50%*.
- Asset at Risk: Since personal loans are unsecured loans, Amit does not have to worry about submitting any collateral as security. He only needs to make timely payments for his EMI to avoid paying extra interest + late charges.
- Tenure: Amit has the flexibility to choose repayment tenure as per his repayment capacity and monthly budget constraints. He can choose a tenure of upto 2 to 5 years that allows him to opt for an EMI that suits his budget. Thus, further reducing his financial stress.
In conclusion, while both gold loan and personal loan have their own sets of pros and cons, taking personal loan can be the more practical option for you. You do not need to give your gold away as security. It allows you to tackle your financial emergencies without putting any stress on your future budget. The manageable EMI options stretched over reasonable tenure make this achievable for you!
Have any doubts? Get them all cleared by our loan experts. Write to us at firstname.lastname@example.org or call our toll free number on 022-6713-6714.