Loans are one of the most sought-after financial instruments to fulfill cash needs for varied needs. Loans can be either secured or unsecured. A secured loan is one where you pledge an asset you own as collateral. On the other hand, an unsecured loan is one where you don’t need to put your assets on the line.
Gold loan and loan against property (LAP) are two secured loans to avail when you need funds. While for a gold loan, you need to pledge gold jewellery or gold coin(s) as collateral, for a loan against property, you need to put a property, residential or commercial; you own on the line. Let’s look at what differentiates a gold loan and a loan against property.
Gold loans aren’t a new concept in India. The practice was always part of the unorganised lending sector. But now, it has become a part of the organised lending sector, with many lenders offering them.
They can be availed against gold ornaments and coins, which are evaluated by an in-house expert, based on which the loan amount is decided. Often, you get around 75% of the gold’s value as a loan.
The gold is in the custody of the lender until the loan is repaid. Note that the tenor of gold loans is much shorter as compared to loans against property. This significantly pushes up the monthly EMIs. Moreover, the falling gold prices have led to an increase in the interest rates of the loan.
Loan against property
You can avail a loan against property for both residential and commercial properties. They have a long tenor (up to 18 years), and a loan amount up to 75% of the property’s market value can be availed as a loan. Therefore, if the property’s market value is high, you can get a high loan amount. Since, the interest rates on loan against property is quite low in comparison to other loans.
Additional Read: A step by step guide to apply for a loan against property
For example, Bajaj Finserv’s Loan Against Property amount can go up to Rs. 5 Crore, or higher for candidates who meet the eligibility asks. A long tenor (2-20 years) of the loan ensures that you can pay off the loan conveniently on easy EMIs. Moreover, your loan application requires minimum documentation, and the entire process is completed within 72 hours*.
Both gold loans and loans against property have their distinct advantages. If you need a small amount as a loan, gold is your best bet. On the other hand, if you need a high amount on easy EMIs, a loan against property should be on your radar.
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