Individuals often require additional liquidity to address their varied financial requirements. For instance, big-ticket purchases, education, wedding, vacation, or any short-term emergency financing need can be funded by availing credit against simple terms; a loan against a property’s mortgage or a gold loan in particular.
Many borrowers opt for these credit options primarily because the property loan interest rate is generally lower than that of any unsecured credit like a personal loan and similar ones.
Nevertheless, while both loans against property and gold loans are secured advances, some striking differences separate them that individuals need to consider before opting for any of these two. Here’s a look
What is a loan against property?
A loan against property is a type of secured credit that one can avail by collateralising self-owned residential/commercial property. Since this mortgage loan comes without any end-use restriction, one can utilise the availed funds for various purposes like buying new properties, debt consolidation, funding trips or studies abroad, among several others.
However, lenders sanction this fund only after assessing the valuation of the property pledged and running proper eligibility criteria check. Moreover, the property loan interest rate also differs from that of a gold loan as interest rates for the latter are often high. Thus, individuals also need to know about a gold loan to understand the differences better.
What is a gold loan?
It is also a kind of secured loan that individuals can avail by pledging the gold to a selected lender. However, to avail of this fund, individuals need to pledge select gold items like ornaments, jewellery, etc. Just like a loan against property, it also does not come with a restriction on end-use.
Though such specifications of a loan against property seem similar to that of a gold loan, they have some fundamental differences. Thus, one needs to go for a gold loan vs loan against property comparison to make an informed decision.
Difference between loan against a property and gold loan
Following are some of the points of difference between these two financial products.
- Loan amount
When it comes to loan value, select financial institutions offer an amount of up to Rs.3.5 crore to eligible candidates. It is also the eligibility parameters that help borrowers to negotiate for a better property loan interest rate.
On the contrary, a gold loan generally comes with a ceiling of up to Rs.1.5 crore. Moreover, in such cases, the value and quality of the gold play the most crucial part regarding the eligibility for such financing.
- Repayment tenure
Generally, the repayment tenures for loans against property come with an extended period of up to 20 years. On the other hand, a gold loan comes typically with a shorter tenure of up to 1 year.
However, to make the repayment even more convenient, individuals need to know how to determine the ideal tenure of their loans against property so that they can efficiently pay their EMIs without straining the finances.
- Pre-approved offer
One of the perks of applying for a property loan is that reputed NBFCs extend pre-approved offers on this credit.
These offers make the loan application process straightforward and less time-consuming. Besides loans against property, these offers are also available on a range of financial products such as home loans. All you need to do is enter your name and contact number to check your pre-approved offer.
Such a facility is often not available on gold loans, and borrowers need to mandatorily undergo the entire procedure of gold valuation before ensuring the availability of finances.
While both loans against property and gold loans come with their sets of pros and cons, prospective borrowers need to weigh their suitability in terms of individual requirements. Nevertheless, comparing the property loan interest rate with that of a gold loan is indispensable to ensuring affordable financing.
