Loans are a financial instrument that saves you from financial crunch situations and fulfils your many needs. Getting a secured loan against gold is often the most sought-after method to escape financial troubles. This is because the loan against property and gold loan interest rate is much lower than unsecured loans. Loan against property or gold can also allow you to get sanctions for a larger amount.
However, a large number of people have a hard time deciding which to pledge- gold or property. To figure this out, you need to know what advantages one has over the other.
Gold Loan
Most Indian households own a fair share of gold jewellery. This can be used as collateral to secure a gold loan. The advantages of gold loans over property loan include-
• The evaluation process of gold jewellery is fast and done by an in-house evaluator.
• Processing time is quicker for gold loans. They are therefore more suitable for emergencies.
• Gold loan schemes are very flexible in terms of interest rate and tenure. You can choose to pay the gold loan interest rate during the tenure and pay the principal at the end of that period.
• You only need an identity proof and PAN card for getting a gold loan.
• You do not have to pay a pre-payment penalty in case you want to pay off your loan earlier than the stipulated time.
• In case you are unable to repay your loan, you only lose your jewellery.
The downsides of a gold loan are-
• It does not add to your credit rating.
• The gold loan interest rate fluctuates with the market price of gold.
• Lower loan-to-value ratio, which means you have to pledge gold jewellery that is worth much more than the cash you require.
Property Loan
Loan against property is sanctioned against a residential property or a commercial property that you own. Although you can continue to use the property, you cannot sell or transfer the ownership before you repay the loan. The advantages of pledging property over gold are-
• The interest rate for property loan is much lower than a gold loan.
• You can get loans of higher value.
• The tenure of loan against property is much longer.
• It adds to your credit score.
However, property loans have their own share of difficulties that include-
• Longer evaluation and processing period. It takes weeks before the evaluation of your property is complete and you can get the loan.
• You have to submit the property documents to the lender.
• In case there are multiple owners of a property, all the owners must sign as co-applicants.
• Getting a loan against property requires a large number of documents such as identity proof, address proof, property documents, PAN Card, and proof of income.
• Pre-payment penalty applies to property loans.
• If you are unable to repay the loan, the lender will seize your property.
Before you jump to pledge gold or property, evaluate how soon you need the funds and how soon you would be able to repay the amount. It is better to take a gold loan for smaller amounts that do not require much time to repay. It gives you a quick solution to your crisis with low risks. However, if you need a higher amount, loan against property is the best option for you.
However, a large number of people have a hard time deciding which to pledge- gold or property. To figure this out, you need to know what advantages one has over the other.
Gold Loan
Most Indian households own a fair share of gold jewellery. This can be used as collateral to secure a gold loan. The advantages of gold loans over property loan include-
• The evaluation process of gold jewellery is fast and done by an in-house evaluator.
• Processing time is quicker for gold loans. They are therefore more suitable for emergencies.
• Gold loan schemes are very flexible in terms of interest rate and tenure. You can choose to pay the gold loan interest rate during the tenure and pay the principal at the end of that period.
• You only need an identity proof and PAN card for getting a gold loan.
• You do not have to pay a pre-payment penalty in case you want to pay off your loan earlier than the stipulated time.
• In case you are unable to repay your loan, you only lose your jewellery.
The downsides of a gold loan are-
• It does not add to your credit rating.
• The gold loan interest rate fluctuates with the market price of gold.
• Lower loan-to-value ratio, which means you have to pledge gold jewellery that is worth much more than the cash you require.
Property Loan
Loan against property is sanctioned against a residential property or a commercial property that you own. Although you can continue to use the property, you cannot sell or transfer the ownership before you repay the loan. The advantages of pledging property over gold are-
• The interest rate for property loan is much lower than a gold loan.
• You can get loans of higher value.
• The tenure of loan against property is much longer.
• It adds to your credit score.
However, property loans have their own share of difficulties that include-
• Longer evaluation and processing period. It takes weeks before the evaluation of your property is complete and you can get the loan.
• You have to submit the property documents to the lender.
• In case there are multiple owners of a property, all the owners must sign as co-applicants.
• Getting a loan against property requires a large number of documents such as identity proof, address proof, property documents, PAN Card, and proof of income.
• Pre-payment penalty applies to property loans.
• If you are unable to repay the loan, the lender will seize your property.
Before you jump to pledge gold or property, evaluate how soon you need the funds and how soon you would be able to repay the amount. It is better to take a gold loan for smaller amounts that do not require much time to repay. It gives you a quick solution to your crisis with low risks. However, if you need a higher amount, loan against property is the best option for you.
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