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Tuesday, April 13, 2021

Which One Is Better To Invest In: Gold Loan Or Loan Against Property?

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Secured loans are one of the most considered options in India when individuals face monetary crises or need a large amount of funding. Although lenders offer various financial products, the two most preferred choices are loan against property and gold loan. Both of these loans are customised to meet monetary requirements adequately.

However, there are certain differentiating factors which can help you make the right choice as per your needs.

Gold Loan Vs Loan Against Property: Which Is Better?      

  • Security Against The Loans

If you wonder what is loan against property, it’s an advance sanctioned against a residential or commercial property kept as collateral with the lender. Here, the loan amount largely depends on the property’s current value in the market.

On the contrary, gold loan is the advance sanctioned to borrowers against their gold ornaments. A specific percentage of the gold’s value is provided as the loan amount. Both the loans come with no restrictions on their end usage, and hence, can be invested in several purposes.

  • Loan to Value Ratio

Lenders usually offer LTV up to 60 – 70% of the property’s value as a loan against property. Gold loan is offered up to 75% of the asset value.

Some financing institutions like Bajaj Finserv provide high-value Loan Against Property up to Rs. 1 Crore for applicants who are salaried and up to Rs. 3.5 Crore for those who are self-employed.

  • Difference in Repayment Tenure

Gold loans are typically available with a repayment tenure shorter than loans against property. This increases the EMIs further, often creating a financial burden on the borrower.

On the other hand, a loan against property brings an extended repayment tenure of up to 20 years. This makes EMIs more manageable and loan repayment convenient for borrowers.

  • The Rate of Interest

Interest rates of a loan against property are comparatively lower than those of gold loans. Also, the associated fees and charges are nominal, making the financial product quite affordable for borrowers.

Leading NBFCs like Bajaj Finserv also offer Flexi Hybrid feature which reduces the EMIs of a loan against property almost by half. It allows borrowers to withdraw funds from a pre-sanctioned limit whenever required and repay the principal at the tenure ends. Interest rate is charged only the sum withdrawn and not on the total principal. Additionally, borrowers can choose to pay only the interests as EMIs.

  • Loan Processing

The application process is also comparatively easier and faster than the other one. To apply for this advance, you can simply visit your lender’s website, find the application form and fill it up as required. Submit once done along with the necessary documents to complete the mortgage loan processing requirements.

You can expect a quick disbursal within 48 hours post-approval with lenders like Bajaj Finserv. One of the most trusted NBFCs in India, it also brings customised pre-approved offers on home loans, business loans, personal loans and a range of other financial products and services. Such schemes simplify the process to avail a loan and reduce the overall time-consumed.

Considering these factors, choose the right type of loan depending on your requirements and preferences. For example – if you prefer a short tenure, gold loans can be a good choice. If longer tenure and lower rate of interest are what you need, go for loans against property.

Moreover, a loan against property also comes with tax benefits under the Income Tax Act of India, based on its end usage. If you utilise the funds to invest in your new house, you can get tax benefits up to Rs. 2 Lakh on the interest paid, under Section 24. Understand how to avail tax benefits on a loan against property before applying for one.

So, it’s better to opt for a loan against property and repay the funds over a convenient tenure without defaulting. Lenders offer this advance based on easy-to-fulfil eligibility criteria and documents.

Some of the Eligibility Parameters

  • Employment Status: Every applicant must either be a self-employed professional or non-professional or a salaried employee.
  • Age Bracket: Salaried applicants should fall within 33 – 58 years of age while self-employed individuals should be within 25 – 70 years.
  • Nationality: Applicants need to be Indian citizens residing in the nation.

It’s essential to fulfil all the eligibility parameters set by your preferred lender to avoid rejection of the application.

Some Essential Documents Needed To Apply  

  • Documents of the property mortgaged.
  • Aadhaar card or PAN card.
  • Address proof.
  • Bank statements of 6 months for self-employed and 3 months for salaried.
  • Salary slips for salaried applicants.
  • IT returns of salaried applicants.

You may need to provide additional documents depending on your individual conditions during the mortgage loan processing.

Assess all your requirements carefully and choose the feasible option that best suits your needs.  These are the basic parameter to make choices between Gold Loan Vs. Loan Against Property. Follow the basic step by step guide to avail a loan against property. Check the EMIs in advance to know the monthly outflows towards loan repayment using an online EMI calculator.    

Also Read: How do you choose a better residential flat?

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