The need for cash is like that unwelcomed guest who knocks at our doors at any odd time of our lives. When no other funding options make its way to our mind, we crawl through the websites of numerous lenders and finally click where we find a pop-up saying ‘instant personal loan‘. Most of the times this way of funding works and makes us receive the needed financial support.

But have you ever thought of other options of availing a multipurpose loan?

Personal Loan

Is personal loan the only option to avail instant cash?

How can a Personal Loan be Helpful for Your Lifestyle

Well, the facts say that a personal loan is the most exploited option but certainly, it is not the only option that can be availed during emergency monetary needs.

Personal Loan Pros & Cons

Pros

  • Instant Approval
  • Fast Disbursal
  • Flexible repayment option
  • Collateral free
  • No guarantor required
  • Can get approved for a high loan amount
  • No restriction on the end-use of money

Cons

  • High-interest rate as compared to the other two
  • More financial burden
  • High EMI
  • Low tenure period

Let’s find out more ways to avail instant cash and along with that let’s find the best one for a credit.

Gold Loan

A gold loan is a secured loan. A gold loan can be taken by collateralizing your gold ornaments. One can avail 60% to 70% of the gold value as a loan. The loan amount can go up to 90% if the borrower ready to pay a higher rate of interest. The interest that the borrower has to pay for a gold loan is less than personal loans. Most of the gold loans come without a fixed tenure. You can only pay the interest and keep the loan account active for years.

Gold Loan Pros and Cons
Pros

  • Fast loan approval
  • Flexible repayment tenure
  • Low-interest rate

Cons

  • The high margin between the price of gold and loan amount approved
  • Short repayment tenure
  • Only those can have who have gold
  • You may not get the amount which you need

Why Investing in Gold is a Good Option in this Volatile Market?

Home Loan Top Up

If you are an existing home loan borrower, you have an excellent way of getting additional fund which is called a home loan top-up. A home loan top up is a multipurpose loan which can be used for any personal use. This way of credit is cheaper than availing funds by a personal loan. The interest rate is generally 1% to 2% higher than a home loan. A home loan top-up can be availed if your repayment history is excellent and you have serviced your home loan for a minimum of 3 years.

Home Loan Top-up Pros and Cons

Pros

  • Minimum Documentation
  • Fast Processing
  • No restriction on the end use of the money
  • Tax benefits can be availed
  • Low-interest rate

Cons

  • Available only to the existing user
  • Can be availed only from the bank from where you have an existing loan
  • Increase in EMI

Home Loan Top-ups – Are there Better Options?

How to Find the Best One?

Here we have seen two more ways other than an online personal loan to get a financial boosting at the time of need. To find out the best among the three, here are some parameters which we can look into.

Interest Rate

The interest rate is the prime factor which determines the cost of borrowing. The interest rate of a home loan top up is 8.7 – 9.85%. If you avail the same amount through a personal loan, you will have to pay interest of 11.49% to 24.00%. Whereas, if you avail a gold loan, the interest that you will be charged is 11.05% onwards. So if we see from the point of view of interest rate a home loan top-up will be the best choice.

Processing Fee

The processing fee for all three types of credits is different. A personal loan processing fee is up to 1% – 3% of the loan amount. A home loan top-up processing fee is 0.25% – 1% of the loan amount. The processing fee for a gold loan is 0.5% to 1% of the loan amount. In the loan processing fee parameter, once again a personal loan is at the bottom of the ladder.

Basic Rules to Follow When Taking a Loan

Tenure

If you check all the credit options in the parameter of loan tenure, once again a home loan top-up will be at the top. The tenure of a home loan top up is up to 30 years whereas the maximum tenure of a personal loan is 5 years. The gold loan can also be extended to 5 years.

Time of Disbursal

If we compare the lending options in the criterion of the disbursal time, a personal loan will always be at top. The personal loans most of the times are processed within a few hours and the fund will be deposited in the bank account of the borrower on the same business day. But if you avail a gold loan, you have to be present in the lender’s office with your gold and they check the quality and quantity of the gold before they sanction the loan. So it may take a time of 2 days to disburse the loan amount. A home loan top up loan takes 3 to 4 days to be disbursed.

The Risk Factor

The risk factor is near to nil when you avail a personal loan. Personal loans are collateral free loans so none of your assets is at risk. Whereas both gold loan and home loan top up are secured loan and if you are unable to pay the loan off, your assets are at the risk of being liquidated by the lender.

Tax Benefit

Among the three ways of availing additional fund, the only way which makes you avail tax benefit is a home loan top up. Rest of the credit options are taxable and you are to pay tax on the loan amount according to your tax slab.

Eligibility

The Eligibility criterion for each kind of credits is different. To avail a home loan top up, you are to be regular in paying your EMIs till three years. The eligibility criteria for a personal loan is the credit score and the repayment capacity. The gold loan eligibility criterion is nominal. When you collateralize your gold to the lender they only check your repayment capacity.

Your Employer and Your Loan Eligibility

Loan Amount

The maximum loan amount which one can avail by a home loan top up is 60% to 70% of the property value. In the same way, the loan amount of a gold loan is again 60% 70% of the gold value in the present market. The maximum loan amount one can get availing a personal loan is Rs.25 to Rs.30 lacs.

As per the comparison which is made above, we can find that a home loan top up is the best way of availing a big amount of loan at the lowest interest. But at the same time, we are not to ignore the fact that a personal loan alone becomes your savior when you neither can wait nor can visit the lender’s office. Beyond such situations, if it is a pre-planned credit then a Home Loan Top Up is the best way to avail the extra fund.

(Updated 22-07-2019)