Without a doubt, personal loans have been a popular and useful way for many people to get loans. The most important benefit has, over the years, been the ability to quickly obtain the funds and not having to worry about their intended use.
Personal loans, however, are unsecured loans, so your capacity to pay them back heavily depends on your credit score. Therefore, if you don’t check your credit score before applying for a personal loan and the lender does and finds that it’s low, your application might be rejected.
If you have enough gold as an asset, it makes sense to get a gold loan in these conditions. Due to the popularity of gold, getting a SBI gold loan is frequently a convenient and preferred method of borrowing money. Even if you were turned down for a personal loan and are now wondering how to raise your score, it’s critical to remember that it takes time—typically a few months—to build or improve your credit score.
Therefore, if you require money immediately, a gold loan is your best choice. Here are some reasons that can help you go in favor of going for a gold loan.
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Even though the SBI gold loan interest rate offered varies greatly from one another, all of them have a quick level of disbursal in common. Gold loans probably require the least amount of paperwork compared to other forms of credit, allowing lenders to issue them quickly. Due to the fact that they are frequently repaid the same day they are requested, gold loans are among the fastest ways to obtain credit. Instead of wasting a lot of time calling or visiting different lenders, you can visit online financial marketplaces to compare lenders and choose the best one based on your financial needs and eligibility requirements.
Amount of SBI gold loan is unrestricted
Gold loans are similar to personal loans and top-up home loans in that there are no restrictions on how the money may be used. A gold loan’s lender is free to allocate the money however they see fit. This suggests that the money can be used for any objective, such as paying for a wedding, a child’s college expenses, or an unexpected medical expense. As a result, both personal loans and gold loans have this quality. Thus, they are alternatives to one another—but only for those who have enough gold to use as collateral and borrow against it when they need fast money.
Credit score is not given much importance
When applying for gold loans, you don’t need to worry much or at all about your credit score. Since gold loans are fully secured by the gold offered as collateral, lenders typically don’t give much weight to the applicant’s credit score. Since credit score is a key factor in whether or not you can get a loan and even in setting SBI gold loan interest rate, it makes it a good loan option for those who might struggle to get other loans. These people might have bad credit or none at all. The lender may, however, place more emphasis on the borrower’s credit score if the loan amount is on the higher side in order to assess the risk based on how well they have historically repaid loans. You would then need to take steps to improve your credit score, such as routinely reviewing your credit report, not using more than 30% of your total credit card limit, keeping a healthy balance of secured and unsecured debt, paying your loan EMIs and credit card bills on time, etc. All of this raises your credit score, which increases your chance of getting a loan approved.
Adaptable options for repayment
Gold loans have additional benefits in addition to the fact that your credit score is either not considered at all or is given less weight. In addition to the standard EMI option, in which the borrower repays the principal and interest (at the applicable SBI gold loan interest rate) each month, some gold loan lenders offer flexible repayment options that give the borrower more ways to pay back the loan. Borrowers have access to a customised repayment option that enables them to pay only the interest each month and defer paying back the principal until the loan’s term is up.
Another way to repay a gold loan is to first pay the interest at the time the loan is approved at the current SBI gold loan interest rate, and then to pay off the principal at the conclusion of the loan’s term. Bulk repayment, which lets the borrower pay off the entire loan balance at once, including the principal and interest, is also permitted by some lenders.
The loan repayment strategy that complements a borrower’s cash flow the best should be chosen. On the other hand, if a person has a high credit score and a steady source of income, they can still choose the regular EMI option. This is because regular principal servicing, which begins at the beginning of the loan term, results in lower interest costs at the low SBI gold loan interest rate than the alternative options.
No need to sell the gold asset.
You can obtain cash without selling your gold by using it as security for a gold loan. You can do this to get your pledged asset back from the lender after the loan has been repaid. You would have to relinquish ownership of the gold if you sold it to raise the required funds, regardless of how hard you worked to raise your credit score.
Overall. It all comes down to comparing the two options— SBI gold loan and a personal loan—on the various parameters we’ve covered, and then—after accounting for the critical distinction between the interest rates of a gold loan and a personal loan—applying for the one that best fits your budget. Always remember that making the right choice is important as it affects your financial health in multiple ways.