To understand the functioning of car loans and gold loans simultaneously we must understand that although the objective of both these loans is similar, there are certain differences between the integral concept of the loan forms which differentiates their functioning and their subsequent implementation in the economic environment. When we start differentiating between the loans, we start by defining the gold loans and car loans. While speaking about gold loans we say that it is that form of loans where the banking institutions accept the application of the borrowers only when the borrowers submit and deposit the requisite amount of collateral securities to the banking institutions and upon the correct valuation of this collateral, the required loan amount is transferred to the personal account of the borrowers.
On the other hand, car loans are those forms of loans where the borrowers take loans from the banking institution when they find that the amount of money required by them for purchasing an automobile vehicle is difficult. Thus there are considerable conceptual differences between gold loans and car loans. Following are the other differences existing between gold loans and car loans-
Nature and Functioning Mechanism- There is a difference in the usage and the functioning mechanism of car loans and gold loans. Gold Loans are generally secured because they are secured through the application and the implementation of the collateral securities associated with the functioning of the gold loan facilities. Moreover, with the use of a car loan calculator, the customer can easily evaluate the installment amount, depending upon the tenure of the loan. Since the borrowers deposit a requisite amount of collateral securities, it is guaranteed that the borrowers would repay the loan within time and they would also know the consequences of any delay in the payment of the interest and the installment amount. On the other hand, car loans are unsecured where no necessity arises for depositing the requisite amount of collateral securities. Unsecured nature means that the borrowers can secure the loan only when they pay the requisite loan interest amount monthly and therefore maintain the relationship between the borrower and the banking institution.
Interest Rate of Both These Forms of Loans- The second underlying difference between the functioning of Car Loans and Gold Loans is the prevailing interest rates for both car loans and gold loans. Since gold loans are secured and the borrowers have already deposited a certain percentage of collateral security deposits to secure the transaction with the gold loans, the banking institutions are compelled to keep the percentage of interest charged low, so that the borrowers do not wither away on seeing that the interest rate is high. However, since the amount of loans taken in the case of car loans is high, the loans are unsecured. Interest rates for car loans are high since the borrowers would prefer to pay high-interest rates so that they can clear out the loan amount well before the completion of their loan tenure. IDFC Bank Car Loan is feasible for the borrowers to avail the loan facility.
Conclusion
In conclusion, we must remember that both gold loans and car loans have the same objective and have the same aim while leveraging the financial resources- to integrate the financial resources and therefore bring about an improvement in the enhancement of the financial instruments and thus bring about an improvement in the functioning of the leverage and liquidity instruments. Therefore, gold loans and car loans have become instrumental parts of financial functioning in the economy. However, certain existing differences between the principal aspects of both these loans differentiate between the operating tendencies of the loans.
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