There are situations in life when we may need some financial assistance. It could be a sudden medical expense or an unexpected cash crisis, or to pay an education fee. In such situations borrowing money from dear and near ones may not always be an option for all. Thanks to authorised lending institutions like Muthoot Fincorp, one can easily sail through such situations with ease. But at such times, one might be confused on which type of loan to take. The loans that can be used for personal use in such situations are loans against securities (loan against shares, assets, gold, fixed deposits), personal loans and credit card loans.
Why is a Gold Loan Better Than a Credit Card Loan?
With skyrocketing gold prices, if you have invested in gold, you can easily pledge that and avail of a reasonable loan amount to tide over a temporary cash crunch. The past few decades have seen only a steep rise in gold prices and never otherwise. Hence you can avail of gold loans from Muthoot Fincorp and even use our top-up facility to further cater to your emergency cash needs. Unsecured loans like personal loans and credit cards entail colossal interest rates that can further stress your finances, especially when cash is strapped. Let’s compare each feature of credit card loans and gold loans to know in detail which is the best for you.
Collateral
Gold loans are secured loans, and hence they offer lower interest rates than loans that do not involve any collateral. Credit card loans are unsecured and come at high loan interest rates up to 24% per annum, while gold loans start at 6.9% per annum. Additionally, the processing fees for gold loans are also very low, as Rs 12 to 0.25% of the loan amount availed at Muthoot Fincorp.
Credit History
Credit history is essential for credit card loans, while it isn’t critical for gold loans as they are secured loans. So, if your credit history is lower, you can still take a gold loan and repay it on time to increase your credit scores. Additionally, unlike credit cards and personal loans, gold loans do not check credit scores to offer you the best deals in the market. You can still get lower interest rates and higher funds with your security pledged.
Quicker Loan Approval and Fund Disbursal
Credit cards are quicker, but gold loans are even faster regarding approval and disbursal. Availing of gold loans are hassle-free as well. You can walk into the nearest Muthoot branch and avail the loan within an hour.
Loan Amount
With credit cards, you cannot exceed your credit limit. Additionally, exhausting your credit card limit will take a hit on your credit score. Meanwhile, you can avail up to 70 % of the gold value pledged as a loan amount instantly with gold loans. You can even take a top-up loan on your existing gold loan if you haven’t utilised the full value of the gold asset pledged. You can easily calculate the maximum amount of gold loan you can get according to the weight of the gold loan and the interest rate of the gold loan at the comfort of your home using a gold loan calculator.
With this free self-help tool, you need to input the required loan amount and residential state. Once you submit the details, the page will display the interest rate and tenure accordingly. You can choose a combination that you can repay quickly and plan your loan before availing it. We have more than 4200 branches across India for your convenience. You can select the scheme of your choice by going to the nearest Muthoot branch near you.
Flexible Repayment
Unlike credit card repayment, gold loan repayment is flexible. The borrower can choose from several options for repayment, which are not offered in any other type of loan. Let’s know what they are:
- Repayment through monthly EMIs.
- Repayment of only interest rate during the loan tenure and payment of rest of the amount at the end of the tenure
- Repaying the total loan amount and interest rate together at the end of the tenure.
Gold Loan Vs Credit Card Loans in a Nutshell:
| Feature | Credit Card | Gold Loans |
| Collateral | No collateral required | Requires gold as collateral |
| Interest Rates | Credit card interest rates are higher as it is an unsecured type of loan and starts an interest rate of 24% for a year. | Gold loans being a secured loan, come with the lowest interest rates starting at 6.9% per annum. |
| Loan amount | You can avail of a maximum loan amount up to the credit limit permissible | You can get a loan amount of up to 80% of the pledged gold. |
| Credit History | It plays a crucial role in getting better deals | Not essential to obtain better deals |
| Loan Approval | Quicker | Quicker than Other Loans |
| Tenure | Loans are generally offered for a year | Gold loans are provided for a maximum period of 6 months |
| Documentation | You need a good credit score, a stable job, a higher income and a good repayment capacity. | Apart from submitting collateral, you only need to fill a basic KYC for the application. |
Additionally, with gold loans, your gold stays secure at the deposit vaults for safekeeping. Hence, you can also save money on locker rent with gold loans.
While both loans have similarities and differences, Muthoot Fincorp offers the lowest interest rates on gold loans, which are easy to avail of. If you would like to avail of a gold loan, you can give us a call at 1800 102 1616. We are happy to answer your queries.
