Whenever an urgent need for money falls on us what are the first few alternatives comes to our mind. I guess most of the people either approach their friends to borrow the money or can approach a bank or financial institution for taking loan. When we talk about loan, things becomes little complicated as we can find two options available in the market – personal loan and gold loan. As both of these loans can be availed for any urgent money requirement. Lets have a detail discussion on both the loan types to solve this confusion.
Gold loan as name suggest is a loan on gold. It is one the one of the oldest form of loan which is now being offered by financial institutions at a bigger level. Anyone having gold in the form of ornaments or otherwise can take loan from banks or financial institutions against there gold product. When you approach a bank for gold loan, they first evaluate the value of gold on the basis of market price of gold and its purity. After evaluation, lender offers the loan amount to the customer which is usually 60% of the amount of gold.
- Less Documentation :- In case of gold loan, an identity proof and address proof is enough to get the loan. No more documentation required.
- Quick Loan :- You can get loan in a single working day, even some financial institutions offers loan in few hours also.
- Interest Rate :- The interest rate on gold loan varies depending on your loan requirement against the gold you pledge to the lender. The interest rate usually vary between 10% to 17%. For Example if you want to get a loan of Rs 100,000 against the gold of Rs 200,000 the bank will charge rate of interest @ of 10%. If your loan requirement against gold of Rs 200,000 increases from 100,000 to 150,000 the rate of interest will also be charged at higher rate i.e 15%.
- Processing Fees :- In case of gold loan, processing includes evaluation of the gold purity which is mostly borne by the borrower. The processing fee charged for the loan is usually very low which can even be waived off on negotiation.
- Eligibility Criteria :- There is no eligibility criteria in case of gold loan, you can get the loan based on the gold.
- Repayment Structure :- Bank also offers different repayment structure in case of gold loan where borrower can pay only the interest part during the tenure of loan and principle being repaid at the end of the loan tenure in lump sum.
- Secured Loan :- Gold loans are secured against gold i.e your gold will be released on payment of the loan amount taken by the borrower with the interest.
- Prepayment Charges :- Bank usually do not impose any foreclosure penalty. But irregular payment can attract penalty charges.
Personal loans are offered by almost all the banks and financial institutions. Personal loans are called as unsecured loans as this is not secured against any collateral. Banks take few things into consideration before approving the amount of loan applied. Out of all, most importantly monthly income of the borrower
- Interest Rate :- The interest rate on personal loan are usually higher than other loans it varies from 12% to 30%.
- Processing Fees :- In case of personal loan, the lender charges processing fee which varies from 2% to 2.5%.
- Prepayment Charges :- Most of the bank impose 3% to 4% charge on the foreclosure of loan.
- Processing Time :- The processing of personal loan usually takes time between 2 to 7 working days.
- Documentation :- In case of personal loan, bank usually needs more documentation like an identity proof, Age Proof, Address Proof, Income Proof, Job Continuity Proof, Banking History etc.
- Unsecured Loan :- Personal loan is called as unsecured loan as borrower do not need to give any security to the bank for getting the loan.
- Eligibility Criteria :- In personal loan, bank usually check the eligibility of the borrower in terms of his ability to repay the loan.
- Joint Loan :- You can take joint personal loan to increase the loan eligibility.
- Credit History :- Bank usually check credit history of the borrower before approving the loan request.
- Loan Duration :- Personal loans are short term loans which are usually offered for 3 to 5 years.
- Repayment Structure :- Bank usually divide the total loan amount in equal monthly installments to make it easy for the borrower to repay the amount. EMI = Principle + Interest.
- Maximum Limit :- Most of the banks have a set limit for personal loan irrespective of the income i.e ability to repay of the borrower. In most of the cases it ranges from 15,000 to 10 lakhs.
|High Processing Fee||Low or No Processing fee|
|Complete Documentation||Less or No Documentation|
|High Interest Rate 12% to 30%||Low Interest Rate 10% to 17%|
|Loan amount depends on borrowers income||Loan amount depends on gold value|
|Joint loan with another earning member can increase your loan eligibility||Loan eligibility criteria is only the amount of gold you possess.|
|Unsecured Loan – No Security Needed||Secured Loan – Secured Against Gold|
|Loan Tenure is usually 3 to 5 years||Loan Tenure is usually 3 to 12 months|
|Credit History Check Is Done Before Sanctioning Loan||No Need For Credit History Check|