When faced with a financial emergency, many people turn to personal loans for help. These loans are specifically designed to help you get through a financial crisis. Its high interest rate, on the other hand, is rather taxing on the pocket. What if you aren’t qualified for a personal loan? What if you require a loan amount that is significantly greater than what you are eligible for under a personal loan? In this circumstance, you may consider leveraging your accumulated funds to help you get out of your financial bind. However, liquidating assets like mutual funds and fixed deposits may not always be a viable decision.
So, what are your options for getting out of this situation? You might find the solutions you’re seeking in a gold loan or a loan against property (LAP). We’ve put the two secured loans against each other so you can decide which one will work best for you in times of financial emergency. Let’s look at the factors to determine which will be more advantageous for you:
- Collateral
Secured loans are so named because they are secured by an asset or security that serves as collateral and is held by lenders until the loan amount (including interest and other fees) is fully paid off. If you cannot repay the loan for any reason, your lender will retrieve the outstanding loan amount using the pledged collateral.
Because both the loan against property and the gold loan are secured loans, you must pledge an asset as security to the lender. You must promise gold objects in jewellery and coins to qualify to finance a gold loan. LAP, on the other hand, requires you to mortgage your business or residential property.
2. Interest Rates
For all potential borrowers, the rate of interest is the most important factor to consider. The interest rates on gold loans are fixed, whereas the interest rates on loans against property are both fluctuating and fixed. Interest rates on gold loans range from per cent 9.24% to 26%, while fixed interest rates on loans secured by real estate typically range from 9.6 per cent to 11.5 per cent.
3. Eligibility Criteria
To obtain a loan, you must first be eligible. In the case of a gold loan finance company, they are less concerned with the applicant’s occupation, credit score, and other factors. That, in turn, benefits all potential borrowers, especially those who find themselves in a financial emergency, as it raises their chances of getting their loan applications granted. Most lenders will give a gold loan to anyone aged 18 to 75 as long as the gold jewellery or coins are pledged to meet the lender’s conditions.
The eligibility standards for LAP, on the other hand, are more severe than those for gold loans. It varies significantly from one lender to the next. Still, age, income, property worth, previous liabilities (if any), business stability or continuity, and credit history are all factors that all lenders assess before granting a loan application.
4. Loan Processing Time
Gold loans are quick and simple to obtain, making them a perfect financial choice for those who require cash quickly. The documentation is low due to the lenient eligibility criteria, which speeds up the loan process. You can acquire a gold loan approval in as little as a few hours, nearly instantaneously.
On the other hand, it takes to process a LAP loan is longer than it takes to handle a gold loan. Lenders must check all property-related documentation, which takes time. Furthermore, if the property in question has many owners, each will be required to file a NOC (No Objection Certification) to obtain the loan, thus lengthening the processing time.
5. Processing Fee
Lenders demand a fee called a processing fee to process any loan. Lenders could charge a processing fee of up to 2% of the loan amount for gold loans. Some lenders, such as IFL Housing Finance, do not charge any fees for the loan processing. Lenders can impose a processing fee of up to 2% of the loan amount for LAP, which varies based on each lender’s regulations and terms and conditions.
6. Repayment Tenure
The repayment term is the time you have to repay the lender for the money you borrowed. The EMIs will be less as the loan payback time lengthens, making it easier for you to repay the borrowed funds. However, choosing a longer payback period will result in greater overall interest payment.
A year is all it takes to repay a gold loan. LAP payback periods, on the other hand, might last up to 20 years. Due to gold loan quick payment (short repayment term of a gold loan), the EMIs will be significant. As a result, this loan is ideal for people who require a small sum of money. LAP is a preferable option for a large loan sum. Its long payback term will reduce your EMIs and make it easier for you to repay the borrowed funds.
7. Documentation
The documentation for a gold loan is straightforward, and the application process does not necessitate a stack of papers. Potential borrowers require a signed loan application form, two passport-size pictures, and a copy of evidence of identity and domicile. The list of documentation needed when applying for a loan with LAP is a little longer. A signed loan application form, evidence of identity, proof of income, and proof of domicile are all required.
Conclusion
Whether a gold loan or a loan against property is better for you is determined by your needs. Gold is a commodity that most people own. It is extremely liquid and has a high market value. Because gold loans have a short repayment duration, they are suitable for small loans. LAP has a low-interest rate and a long repayment period, making it ideal for borrowing a significant sum of money. A gold loan should be your first choice when you have a financial emergency because it has fewer eligibility requirements, requires fewer documents, and takes less time to process. That is where you’ll need us; IFL Housing Finance is the best loan company in India and amongst the first organizations in India to claim disbursal in 3 days. So, the next time someone asks you if you know about the best gold loan finance company in Delhi, you’ll know what to tell them. Contact us for further details regarding our services.