Finance

It’s Time To Choose a Gold Loan Over a Personal Loan

Gold Loan is all over the market nowadays rather than a personal loan, though personal loan has their value, Gold Loans are preferred better over them.

Gold is one of the most precious commodities that in India each house has. Originally it was considered as just a matter of price to flaunt that we are rich, but today, you can make use out of it very easily without many terms and conditions.

Prices of Gold keep on fluctuating. Usually, it is on the higher side, so if you are planning to opt for a personal loan for a small amount of money, it would be considered as a wrong move as you can go for a Gold Loan, which not even requires a good credit score or many documents.

Moreover, you will be getting a higher amount as Loan Against Gold [LAG].

Here are some more features which will sound convincing to you:

Loan Amount

The LAG offers you a maximum loan between Rs 50,000 to Rs 25 lakhs; it provides you around 80-90% as a Loan to Value [LTV] for the gold with banks and 60% LTV with Non-Banking Finance Companies [NBFC].

 The interest rate of a personal loan is almost the same as of a Gold Loan, while the personal loans don’t even give securities and are unsecured, whereas on the other hand, in Gold Loans, gold itself works as a security and safety. 

 Moreover, also keep this in mind if you are applying for a personal loan, your previous account history will also impact your loan interest and loan’s availability. 

 Interest rates

Most importantly, the rate of interest of LAG is lesser than that of the personal loan. LAG ranges between 14 to 24 % while, commonly, the lenders average at a rate of 15%. Thus, the personal loan interest rate is between 15 to 18%.

Loan Duration

The loan duration of LAG is from a few weeks to two years; it depends on the lender you choose. Though, the personal loan offers loans for around five years. But once your tenor gets over, you can renew your LAG by submitting a small fee amount.

 Prepayments Charges

In LAG, you are not required to pay the prepayment charges, only a few lenders or institutions charges. But in the case of a personal loan, you might have to pay your principal outstanding amount around 2 to 4%.

Moreover, if there is a financial emergency and you need to take out your funds at the time also in personal loans, you need to pay some amount.

Processing fee

In LAG, you would pay around 1.5 % of the loan as the processing fee, whereas in the personal loans, it’s around 2 % of the loan.

How these Loans Work

Personal Loan:

Here you get the lump sum amount as a personal loan, and there are its eligibility criteria also which you should fulfil; you must have maintained a good credit record in your savings account, your documentation should be all up to date.

LAG:

In LAG, you get two options, i.e. the term- lump sum or a simple overdraft facility.

If you are opting for the term-lump sum option, you will have to repay the loan amount at the end of the tenor, including the rate of interest for the entire loan period.

If you opt for the overdraft option, you can take funds even more than your available bank balance; the interest is charged on the amount of overdraft as it will be there till the time you repay all the amount.

Conclusion

Gold Loan is a better option over a personal loan as you can get an instant loan if you are opting for the Gold loan as the lender will take from a few minutes to an hour to get your loan done. At the same time, a personal loan takes at least a day in approving.

LAG is cheaper than a personal loan and gives instant loans to the customers. You can always think of getting a LAG whenever willing to apply for a loan; it provides you with more benefits than a personal loan.

LAG even provides you with safety and security, which a personal loan won’t. Moreover, by this article, you must be known of the advantages of LAG over a personal loan, especially in cases when you want to get a small amount of loan

 

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