People with enough physical assets often see protected loans as a way out of a tough financial situation. Financing options like gold loans and loans against property are popular ways to borrow funds with security because it can be used for any need you may have.
While both provide access to funds, they differ in terms of collateral, interest rates, and repayment terms. In this article, we will delve into the characteristics of gold loans and loans against property to help you make an informed decision.
What is gold loan?
A gold loan is a secured loan. As the name suggests, you can use your 18 karat gold jewellery to get a loan starting from Rs. 5,000 up to Rs. 2 crore. The amount of loan you can get against your jewellery depends on the evaluation of the jewellery. With Bajaj Finance, you can get up to 75% of the jewellery’s value. This comes with an interest rate starting from just 9.50% per annum.
One of the significant advantages of a gold loan is its simplicity and quick processing. The documentation process is minimal, and funds are disbursed promptly, making it an attractive option for individuals in need of immediate financial assistance.
What is loan against property?
It is a type of mortgage loan that you can get by pledging your property up as collateral. You can avail of a loan by putting up both business and residential properties as collateral. Financial institutions lend a certain portion of the value of the property. This estimate is based on what the collateral is worth on the market right now. At the same time, lenders look at whether or not an applicant is eligible before choosing how much of a loan to give.
Key differences between gold loan and loan against property
One of the primary differences between a gold loan and a loan against property is the collateral involved. In a gold loan, the collateral is gold jewellery, which is relatively easier to assess and evaluate. On the other hand, a loan against property involves the pledge of a property, which requires thorough evaluation to determine its value and marketability. Due to the difference in collateral, the risk associated with each type of loan may vary.
When considering financial assistance, both gold loans and property loans are viable options. However, there are several reasons why a gold loan may be a better choice compared to a property loan. Here are some advantages of gold loans:
1. Quick and convenient
Gold loans offer a hassle-free and speedy process. The documentation requirements are minimal, and the loan approval and disbursal are usually faster compared to property loans. This makes gold loans ideal for urgent financial needs or emergencies.
2. No risk to property ownership
With a gold loan, you can access funds without putting your property at risk. In a property loan, your property acts as collateral, which means there is always a risk of losing it in case of default. Gold loans provide a way to meet your financial requirements without risking your valuable property.
3. Lower interest rates
Gold loans generally come with lower gold loan interest rates compared to property loans. The interest rates are usually fixed and competitive, making the loan more affordable in terms of repayment. This can help you save on interest costs and reduce the overall burden of repayment.
4. Flexibility in loan amount
Gold loans offer flexibility in terms of the loan amount. The loan amount is determined based on the value of your gold assets, allowing you to borrow as per your requirement. Property loans, on the other hand, may have restrictions on the loan amount based on factors such as the property value and your income.
5. Easier eligibility criteria
Gold loans have relatively lenient eligibility criteria compared to property loans. Even if you have a low credit score or limited income, you can still avail a gold loan based on the value of your gold assets. This makes it accessible to a wider range of individuals who may face challenges in obtaining a property loan.
6. Multiple repayment options
Gold loans typically have shorter repayment periods compared to property loans. This means you can clear your debt sooner and become financially free. Shorter repayment periods also provide a sense of financial security and enable you to plan your finances more effectively.
In summary, a gold loan stands out as a convenient and efficient financing option. It enables you to leverage the value of your gold assets, access quick funds, and benefit from flexible repayment terms. If you prioritise speed, simplicity, and maintaining ownership of your cherished gold items, a gold loan is the ideal choice to meet your immediate financial requirements.
