Rupeek Gold Loan or Personal Loan? Which One to Opt For Urgent Funds?

Gold loans and personal loans are two types of loans that are often considered by people who are in need of immediate financial assistance because they share two common product features: there are no restrictions placed on how the funds can be used, and they can be disbursed quickly, and their interest rates are more affordable than those of other loan options.

In this article, let us deep dive into a comparative analysis to assist you in determining which option is superior:

Interest rate

Depending on the lender and the applicant’s credit history, the rate for personal loans can range from around 10-12% to 24-26%. While rupeek gold loan interest rate vary from 7-8% to 29% annually depending on the lender’s assessment of the risk posed by the borrower, the loan’s tenure, its size, and the repayment option selected. Some lenders typically charge higher interest rates for larger loan amounts and longer repayment terms. Therefore, it is important to assess potential lenders based on various criteria, including interest rate, loan amount, repayment term, processing fee, etc.

The interest rates on personal loans and gold loans may not be very different for borrowers with good credit histories. However, it’s important to keep in mind that gold loans typically have lower rupeek gold loan interest rate than personal loans for borrowers with poor credit histories.

Disbursal time

ITR forms, pay slips, and other supporting documentation must be submitted with the borrower’s personal loan application in order for it to be processed. Because it typically takes some time to verify these documents, personal loan applications are typically processed within 2 to 7 days. However, some lenders claim to offer quicker disbursement, especially for personal loans that have already been pre-approved.

As one of the quickest loan options overall, rupeek gold loan typically disburses within a few hours of the loan application being submitted. The evaluation process places little to no emphasis on assessing the borrower’s credit history and instead focuses primarily on the value of the collateral. Therefore, for those who require money immediately, gold loans are preferable to personal loans.

Role of credit score

Due to the unsecured nature of personal loans, lenders are more cautious when evaluating applicant applications and base their choices primarily on the applicant’s credit history, monthly income, employment history, and other factors. On the other hand, rupeek gold loan is fully secured loans pledged against adequate collateral. This gives lenders the advantage of selling the gold that has been pledged in the event that a borrower defaults. As a result, lenders give less scrutiny when approving gold loans to borrowers with poor credit histories and scores.

Options in loan repayment

Standard EMIs, which include principal and interest payments, are used to repay personal loans. Gold loans, on the other hand, offer a much wider selection of repayment options. In addition to the standard EMI mode of repayment, many lenders allow borrowers to only pay back their interest each month, leaving the principal component to be paid back on the maturity date. Some loans also allow the borrower to pay the interest portion in full at the time the loan is sanctioned, freeing up the principal for repayment at the end of the loan term. You may have the option to repay both the principal and interest of some gold loan options at the end of the term, at the applicable rupeek gold loan interest rate.

Gold loans are therefore better suited for people with short-term cash flow irregularities and repayment issues since there are non-EMI based repayment options available.

Tenure available

Although some lenders may offer terms up to seven years, personal loans typically have terms of one to five years. Although only a few lenders offer longer terms of about 4-5 years, gold loan repayment periods are typically on the shorter side, ranging from 7 days to 3 years. For borrowers who are confident they can repay their loan within a short period of time, a rupeek gold loan would be a more cost-effective option because a longer repayment period translates into higher interest costs. For those who require a larger loan amount and a longer repayment period, a personal loan would likely be a better choice.

Loan amount

Although a small number of lenders claim to offer loans up to Rs 30–40 lakh, the majority of lenders offer personal loans in the range of Rs 50,000–Rs 15 lakh. The main factors that lenders consider when determining whether a borrower is eligible for a loan are their ability to repay it and the loan term they have chosen.

In contrast, the value of the gold pledged as collateral and the loan-to-value (LTV) ratio established by the lender are the main factors that affect the loan amount for rupeek gold loan. The LTV ratio measures how much of the offered loan is compared to the value of the collateral. The LTV ratio of gold loans can differ and range widely depending on different lenders, chosen repayment option, etc.

The regulatory ceiling on the LTV ratio of gold loans issued by banks (for non-agricultural purposes) has been raised by the RBI from 75% to 90% until March 31, 2021. This is crucial to consider when figuring out the maximum LTV ratio.

Processing fees

Processing costs for personal loans can range from 1% to 3% of the loan amount. On the other hand, some lenders charge flat fees as low as Rs 10 for gold loan, whereas others typically charge fees from 1-2% to 3% of the loan amount. Loan applicants should be sure to take processing fees into account when calculating the actual cost of availing a loan, especially when taking out large loans, as they can significantly affect the borrower’s overall cost of the loan.

Last but not the least, remember that whichever loan you select, you need to have the repayment capacity to pay it back along with the applicable interest. Failure to do so will affect your financial health in more ways than one. So choose wisely after factoring in all these parameters mentioned above!

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