Emergencies are an inevitable part of life. Financial setbacks can at times compel you to seek financial support from financial institutions. When it comes to addressing urgent needs, people often consider choosing between a personal loan, a gold loan or taking a loan against property.
However, personal loans tend to involve immensely high-interest rates and stressful qualification criteria. Getting a personal loan immediately in such a situation can be very challenging. Gold loans and loans against property become a better option in such cases.
What exactly are these two types of loans? What can be the better option between the two? Let’s find out.
Understanding Gold Loans
A goal loan is a loan you take from a lender by providing gold ornaments or articles as collateral. Usually, you are given a certain percentage of the ornaments’ value in return. The lender will then charge you an interest rate, and once you pay back the amount, will return the collateral to you.
Understanding Loans Against Property
A loan against property can be taken by mortgaging your commercial or residential property. Depending on the property’s current market value, a specific percentage will then be allocated by the lender as a loan.
So, which one out of the two might be the better option for you? We’ve highlighted a few key differences here to help you make a decision.
1. Eligibility Criteria
Eligibility matters most when you are deciding what loan to apply for. When it comes to gold loans, lenders usually do not worry too much about the applicant’s profession, credit score, or other details. This improves your probability of securing approval for your application.
With a loan against property, the eligibility criteria are far more stringent. Lenders consider aspects such as income, age, and credit history before providing money. This makes the process of becoming eligible for loans against property more rigorous than gold loans.
2. Rate Of Interest
The rate of interest will dictate the amount you have to pay back for years to come. Usually, gold loans are offered by banks and NBFCs at fixed interest rates. A loan against property, on the other hand, is provided at floating as well as fixed rates. As multiple lenders provide gold loans, make sure you examine all possible interest rates charged before making a decision.
3. Loan Processing Time
When compared to loans against properties, gold loans are far quicker to get, providing the perfect solution when you require funds on an urgent basis. With lenient eligibility criteria and lesser documentation required, the loan process here can be far quicker. Similar to an instant loan, you can be approved for a gold loan within a few hours.
With loans against properties, lenders require time to verify property-related documents and get NOCs from all owners involved. This, in turn, can shoot up the processing time.
4. Processing Fee
Most lenders levy a processing fee on the loan you borrow. This holds true for gold loans and loans against policies as well. Before applying for a loan, make sure that you assess any and all additional fees that you may be charged in this process. Furthermore, ensure that your application is not rejected, as you will not receive a refund in case of a rejection.
5. Repayment Period
The longer a repayment period you opt for, the lower your EMI amount will be. However, this will increase the total amount you end up paying as interest at the end.
Due to their flexibility, gold loans can even be repaid within a year. The period for loans against properties can run into several decades, but with a lower EMI amount. With short gold loan repayment tenures, they will also have high EMIs.
Gold loan repayment tenures work with smaller borrowed sums, as the EMI will reduce accordingly. When borrowing significant amounts, a loan against property might be a better option for you.
Assessing Your Requirements And Abilities
When facing the need for urgent funding, gold loans and loans against properties can both be attractive options for you. Choose the option that works best for you, keeping in mind interest rates, immediate availability, and the loan period. Gold loans remain an attractive option, as gold is present in almost every Indian household and enjoys high levels of liquidity. However, if it is a significant amount you wish to borrow, a loan against property might be the better option for you. Whatever loan type you choose to go with, Ruloans is here to help you throughout your journey.
