Is personal loan taken from Kreditbee better than taking a gold loan for urgent funds?
Given the fact that both gold loans and personal loans tend to offer almost competitive interest rates (interest rates on gold loans range from 8 percent to 26 percent, while interest rates on personal loans range from 9 percent to 24 percent), swift loan disbursal, and no limits on end usage, many borrowers, particularly those who own gold, usually struggle to choose the best sort of loan from loan apps according to their unique monetary requirements.
Read on as we compare the two closely related credit options in order to help you understand if you are confused regarding which one to go for.
Why take out a gold loan?
Higher amount scope because of the existence of gold
Gold loans often rank higher than personal loans when it comes to the highest permitted loan amount. Most lenders will only give up to a maximum of Rs. 40 lakh for personal loans, whereas Rs. 1.5 crore can be borrowed for gold loans. A gold loan would be the best choice to meet this demand if you suddenly found yourself in need of a larger loan amount because it would give you more freedom. Furthermore, although personal loans are frequently offered for a minimum loan sum of 5,000 rupees in most circumstances, gold loans can be secured for as little as a 1,000 rupee loan.
Credit score is given less importance
Gold loans from loan apps are quickly disbursed and don’t put a lot of strain on the borrower’s credit score because they are fully secured against the gold jewellery that are pledged. Because of this, consumers with bad credit can still get a loan when they need one, even in circumstances when other loan options are not practical. The lender may sell the ornaments that were pledged as collateral to retrieve any unpaid principal in the event that the borrower defaults on the loan. However, if the loan amount is on the higher side, the lender may place more emphasis on the applicant’s credit score to assess the risk and likelihood that the applicant will default on the loan taken from Kreditbee in the future while paying back the sizeable amount of money involved, along with any applicable interest.
However, while deciding whether or not to approve a personal loan application, creditors heavily consider the applicant’s credit score. When deciding on the loan amount, interest rate, repayment duration, etc personal loan service from loan apps, the borrower’s credit score and ability to make payments are taken into account. If the prospective borrower has a poor credit score, the lender like Kreditbee has the choice of either completely rejecting the loan request or accepting it at a rate that is much higher. As a result of the borrower’s low credit score, the borrower does not have much room for negotiation; hence, in this case, the borrower would be compelled to accept the terms and conditions that were imposed, which would include the interest rate as well as any other terms and conditions.
Fewer documents and more flexibility in how repayments are made
Gold loans unquestionably offer the least amount of documentation needed when compared to other types of lending. Most lenders just want the very minimum of paperwork from borrowers, such as identification and residence evidence. The quantity of documentation needed for personal loans through loan apps is higher than it is for gold loans because they are unsecured loans with a higher level of risk. A personal loan often requires the following types of documentation: a bank statement, evidence of identity, and proof of income.
Additionally, many financial institutions offer gold loans with a variety of flexible repayment options, including the choice to pay the principal and interest in full at the end of the loan term, bullet repayment (pay the principal and interest in full at the end of the loan term), and other similar plans.
On the other hand, personal loans from Kreditbee or any lender currently do not offer this kind of repayment flexibility. The lender will often require that personal loans be repaid in the form of recurring EMIs that must include both the loan’s interest and principal.
Why obtain a personal loan?
Longer repayment tenure option
Regarding the highest loan tenure that may be offered by Kreditbee, personal loans are preferable than gold loans. Gold loans normally have a maximum loan term of three years, compared to the majority of lenders who offer personal loans with terms up to five years and some who offer loans with terms as long as seven years. Longer repayment terms help lower the monthly EMI expense, which makes it easier for the borrower to return the loan quickly and without straining their monthly finances.
Loan can be availed without a single branch visit
The borrower must make at least one trip to the branch of the relevant lender because applying for a gold loan necessitates submitting, processing, and evaluating the gold jewellery that is pledged as collateral. The lender wouldn’t decide on the loan’s amount until the purity of the gold was assessed and its market price was established. Some borrowers might not be able to visit the branch, and it might be a hassle if the lender in issue doesn’t have a branch there. This is particularly typical in rural and semi-rural areas of the country.
The procedure of getting a loan from Kreditbee has become a lot more convenient since the introduction of online financial websites. After visiting their website, borrowers can compare lenders and fill out an application with the one they feel is the most suitable. The remainder of the process is initiated and carried out fully online, from the time the application is submitted until the loan amount is disbursed. As a result, the borrower can get the personal loan approved through the loan apps and have the funds placed into his or her account without having to physically visit the lender’s office.