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Anuja is a businesswoman who owns a popular saree boutique that started 2 years ago. Over the last couple of years, she has managed to build a dedicated and substantial client base, and she now plans to expand her business by establishing a new branch in the city. As she already has a business loan to repay, she now faces a dilemma of whether to avail a gold loan or Loan Against Property. Owing to relatively cheaper interest rates and a flexible repayment tenure, she decides to apply for a loan against house that she owns, instead of a gold loan.
The fetish for gold and an obsession to own a property in India is both at an equal level. A comparison between features of a Gold Loan and a Loan Against Property can help us resolve the dilemma of availing which of these loans when faced with a shortage of funds during a financial emergency.
1. Ease of process:
Gold loan can be instantly availed by pledging your gold to the lender, and the entire application-disbursement procedure shall not exceed a given day. On the other hand, the procedure to avail a Loan Against Property could be time-consuming with multiple background checks and document evaluation. Hence, acquiring an instant loan against house might not be possible if you are in a financial hurry. Also read about mistakes to avoid while taking loan against property
2. Interest Rates:
Gold loans come with interest rates that range between the interest rates of a personal loan and a Loan Against Property. So, availing of a gold loan could prove to be a dearer option than a Loan Against Property.
3. Loan Value:
The value of gold that you pledge with the lender decides the gold loan amount that you might be eligible for. Recently, the Reserve Bank of India (RBI) has permitted lenders to increase the loan to value (LTV) threshold from 70% to 90% of pledged gold’s value[1]. For instance, if you pledged gold worth Rs. 1,00,000 with a lender, you shall be entitled to a gold loan amount of upto Rs.90,000 against it.
Whereas, in the case of a loan against house, the loan value is completely based on the market valuation of your property and can usually range between 50-75 percent of your property value.
4. Tenure:
Gold loans normally come with a shorter tenure ranging between 3 months and 3 years. So, you may opt for a gold loan only if you are fully sure of repaying the loan within a shorter term. Contrarily, tenure for Loan Against Property might normally hover around 5 to 20 years. However, Loan Against Property available on Bajaj Markets provides a tenure of upto 30 years.
5. Repayment terms:
Both gold loan and Loan Against Property offer their customers flexible repayment options in the form of partial payments and balance transfer provisions. However, upon defaulting EMI payments, the lender shall recover the loan dues by taking possession of your mortgaged gold.
In the case of a Loan Against Property, the repayment clauses are quite rigid, and any late EMI payment shall attract a penalty. Further, the lender has the right to take possession of the property and auction it to recover any loan dues. This could be a traumatic experience for the borrower.
As could be gathered from the above comparison between a gold loan and a Loan Against Property, gold loans might be beneficial only if you are looking out for an instant loan repayable within a short tenure. Otherwise, there is no doubt that a Loan Against Property could be your ideal option to avail a higher loan amount with a lower interest rate and flexible repayment options. Also, it is highly advisable to avail a Loan Against Property from trustworthy financial platforms such as Bajaj Markets.
Availing Loan Against Property available on Bajaj Markets is a completely hassle-free, online process and offers you an abundant choice of products to choose from. On Bajaj Markets, you can avail a Loan Against Property for an amount of up to Rs. 1 Crore, based on the estimation of your borrowing power and property valuation, at an attractive interest rate, repayable with a tenure of 30 years. In case you wish to avail of the balance-transfer facility or apply for a top-up loan, you may do so by paying a small documentation fee and no hidden charges.
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