Many people seek assistance from personal loans when they are in a financial situation. These loans have been created especially to help you in getting through financial difficulty. On the other hand, its high interest rate is fairly expensive on the wallet. What if you don’t meet the requirements for a personal loan? What happens if you need a loan amount that is far higher than what you qualify for under a personal loan? In this situation, you might think about using the money you’ve saved to help you get out of a tight spot financially. But selling assets like mutual funds and term deposits might not always be a wise move.
What are your choices for escaping this predicament, then? The answers you’re looking for might be found in a loan against gold or a loan against property (LAP). We’ve pitted the two secured loans against each other so you may choose which will be most helpful to you in a pinch. Let’s analyze the variables to ascertain which will be most helpful for you:
Secured loans get their name because they are kept by lenders until the entire loan amount (including interest and other fees) is repaid and is backed by an asset or security that serves as collateral. Your creditor will use the pledged collateral to reclaim the outstanding loan balance if you are unable to repay the loan for any reason.
You must provide the lender with collateral because the loan against property and the gold loan are secured loans. To be eligible for financing a gold loan, you must pledge gold rings and coins. LAP, on the other hand, requires you to mortgage your business or residential estate.
The rate of interest is the most crucial component to keep in mind for all potential borrowers. In contrast to loans secured by property, both of which have fluctuating and fixed interest rates, loans secured by gold have fixed interest rates. While fixed interest rates on loans secured by real estate normally vary from 9.6% to 11.50%, interest rates on loans secured by gold can range from 9.24% to 26%.
You must first be qualified in order to apply for a loan. The occupation, bond rating, and other aspects of the applicant are less important to a gold loan finance organization. It therefore helps all potential borrowers, especially those who are facing a financial emergency, as it increases the likelihood that their loan applications will be approved. If the gold jewelry or coins are guaranteed to satisfy the lender’s requirements, the majority of lenders will extend a gold loan to anyone between the ages of 18 and 75.
On the other hand, LAP eligibility requirements are stricter than those for gold loans. The amount varies greatly among borrowers. However, all lenders consider a borrower’s age, income, property value, past debts (if any), business stability or continuity, and credit history before granting a loan application.
Processing Time for Loans
Gold loans are a great financial alternative for individuals who do need money urgently because they are quick and straightforward to obtain. Due to the lax eligibility requirements, the documentation is simple, quickening the loan application procedure. A gold loan approval can be acquired in a matter of hours, almost immediately.
On the other hand, processing an LAP loan takes longer than dealing with a gold loan. All property-related papers must be inspected by lenders, which takes time. Additionally, the processing time will be delayed if the property in question has many owners because each will need to present a NOC (No Objection Certification) in order to be qualified for the loan.
Fee for Processing
To process any loan, lenders require a fee known as a processing fee. For gold loans, lenders may impose a processing fee of up to 2% of the loan amount. The processing of loans is free for some lenders. For LAP, lenders may charge a processing fee that runs from 1% to 2% of the loan amount, depending on the rules and terms that apply to each lender.
The repayment period is the amount of time you have to pay the loan provider. As the loan payback period increases, the EMIs will reduce, making it simpler for you to return the borrowed funds. The total rate of investment paid will be higher if a longer payback period is chosen.
A gold loan can be repaid in just one year. On the other hand, LAP payback periods could stretch up to 20 years. The EMIs will be high due to the early repayment of a gold loan (short term of a gold loan). Therefore, this loan is perfect for those who only need a small amount of money. LAP is a superior option for a significant loan amount. Your EMIs would be smaller and it will be simpler for you to return the borrowed funds owing to its extended payback duration.
The application process for a gold loan does not require a mountain of paperwork, and the documentation is simple. A completed loan application form, two passport-sized photos, and a copy of identification documentation are required from loan applicants. When submitting an application for a loan with LAP, more information is required. A completed loan application form, identification proof, income documentary evidence, and proof of address are all needed.
Your needs will determine whether a loan against gold or a loan against property is preferable for you. The large majority of people possess gold. It has a high market value and is highly liquid. Gold loans are appropriate for modest loans because of their quick repayment terms. LAP is the best option for obtaining a significant line of debt because it has a low interest rate and a lengthy repayment period. When you have a financial emergency, a gold loan should be your first option because it has fewer qualifying restrictions, requires less paperwork, and processes more quickly.