Its been quite a common situation that many borrowers, especially those who own gold, frequently find them in, when its difficult to choose the best loan type for their quick financial needs. This is because of common features such as very competitive interest rates (personal loans range from 10 to 26 percent, while manappuram gold loan interest rate range from 9 to 29 percent), quick loan disbursal, and lack of end-use restrictions offered by both gold and personal loans.
If you too are among those confused and are still not sure, read on as we in detail compare the two in order to help you make the right decision as per your financial needs.
Why would you take out a manappuram gold loan?
Pros of gold loan
Larger loan amounts due to gold’s presence
When it comes to the highest loan amount, gold loans typically rank higher than personal loans. Although most lenders only allow personal loans up to Rs. 40 lakh, the maximum amount for gold loans is Rs. 1.5 crore. If you needed a bigger loan amount right away, a gold loan would be your best option because it would allow you more flexibility. Moreover, although a personal loan normally needs a minimum of five thousand rupees, loans secured by gold can be obtained for as little as one thousand rupees.
Lower importance of a person’s credit score
Because manappuram gold loan are fully secured by the pledged gold ornaments, they are promptly repaid and have no adverse effect on the borrower’s credit score. As a result, borrowers with low credit scores can now get loans when they need them, even in situations where other loan options are not feasible. In the event that the borrower defaults on the loan, the lender may sell the ornaments that were pledged as collateral to recoup the remaining amount. If the loan amount is relatively high, a lender may give the applicant’s credit score more weight when evaluating the likelihood and risk of defaulting on the loan, which would require repaying the loan’s sizeable principal plus any applicable interest (as per prevalent manappuram gold loan interest rate).
On the other hand, lenders carefully examine an applicant’s credit score prior to accepting an application for a personal loan. The borrower’s credit score and ability to repay the loan are taken into consideration when determining the loan amount, interest rate, term, and other terms and conditions of the personal loan service provided by Loan App. The lender may decide to approve the loan application at a noticeably higher interest rate or to reject it entirely if the potential borrower has a low credit score. Because of their low credit score, the borrower would have little negotiating power and would be required to accept all terms and conditions, including the interest rate and any additional requirements.
Less paperwork and more repayment flexibility
Simply put, compared to other credit options, gold loans require less paperwork. Most lenders simply need the bare minimum of information from borrowers, like proof of identity and address. But compared to manappuram gold loan, personal loans from Loan App require more paperwork because they are unsecured and therefore have a higher level of risk. You will normally need to submit bank statements, identification documents, and proof of income in order to have your application for a personal loan approved.
An additional feature that many financial institutions provide for gold loans is flexible repayment options. One choice is bullet repayment, which enables you to repay the principal and interest at the conclusion of the loan period in one lump sum. You have the option to make a bullet repayment of the principle and interest at the end of the loan term.
However, personal loans do not currently provide this level of flexibility in terms of repayment. Lenders of personal loans typically demand that the loan be returned in equal monthly installments (EMIs), with principle and interest paid on top of one another.
With a personal loan, why apply?
Pros of personal loan
A relatively longer tenure available
Personal loans are preferable to gold loans when it comes to the longest possible loan term. Most lenders offer terms of up to five years, and some even offer terms of up to seven years, when it comes to personal loans. On the other hand, the maximum term for gold loans is typically three years. Longer repayment terms enable borrowers to pay off loans more quickly and easily without putting a pressure on their monthly cash flow or budget by lowering the monthly installment payment.
More comfort in the process
When applying for a manappuram gold loan, the borrower must visit the lender’s branch at least once because the gold ornaments that are pledged as collateral must be submitted, assessed, and processed. Before determining the precise loan amount, the lender would need to determine the gold’s value and purity. If the lender in question does not have a branch nearby, it could be a hassle for some borrowers who are unlikely to be able to visit the branch. These are especially common in the rural and semi-rural parts of the country.
The loan application process has been expedited greatly by the advent of online financial portals. Borrowers can compare lenders and apply to the one that best fits their needs after visiting the lender’s website. Every stage of the process after the application is submitted is initiated and finished entirely online, all the way up to the loan amount being disbursed. This implies that the borrower won’t need to go in person to the lender if they use loan apps to apply for a personal loan, have it approved, and have the funds transferred into their account.
Last but not the least, remember that comparing manappuram gold loan interest rate with other lenders for both gold and personal loans is a key task you should do besides keeping in mind the above mentioned aspects when taking the decision.