When faced with a financial crisis, many people turn to personal loans for help. Despite this, the high-interest rate makes it difficult to manage. If you find yourself in a tight financial situation, you might consider using your savings to get out of it. In some cases, a gold loan or loan against property (LAP) may be the solution you are looking for. Simply said, you secure your loan by putting your gold jewelry as security. Unlike loan against property qualifying, which is extremely complicated, all you need to get a loan here is gold jewelry. As a result, gold loans provide a broad range of people with instant access to short-term liquidity. The gold is examined by an in-house expert designated by the lender to determine its true value, which is used to determine the loan amount. These are typically short-term loans in which you can borrow up to 75% of the gold’s worth. To make the best decision during a crisis, it is critical to have a thorough knowledge of each of these loan types.
Gold Loan Vs Loan Against Property
1. Collateral
Secured loans get their name from the fact that they are secured by some kind of asset or security, which lenders hold onto until the entire loan balance (including interest and any other fees) is repaid in full. If for any reason you are unable to repay the loan, your lender will use the collateral that you have pledged as security to recover the outstanding balance.
The only way to obtain a loan against property or a gold loan is to pledge a valuable asset as collateral to the lender. You must pledge gold jewelry and coins as collateral for Rupeek’s gold loan. Commercial or residential property must be pledged as collateral for LAP.
2. Rate of Interest
Gold loans come with a fixed rate. You can check how to calculate gold loan interest on the internet. On average, the loan against property interest rate calculator offers cheaper interest rates; nevertheless, keep in mind that they are long-term loans that can be expensive. It’s because interest accumulates over time, and you wind up paying a lot more money than you thought you would. Furthermore, your credit history is a critical aspect in determining your eligibility, as a poor credit score may result in your application being rejected.
3. Eligibility Criteria
Any borrower between the ages of 18 and 75 can typically get a gold loan, provided the collateral they pledge meets the lender’s requirements.
LAP, on the other hand, has more stringent eligibility requirements than gold loans. All lenders consider a few common parameters before approving the loan application, such as the applicant’s age, his or her income, and the value of the property he or she owns; these factors vary slightly from lender to lender.
4. Loan Processing Time
As a result, a gold loan is an ideal financial solution when you need money quickly. The documentation required for this loan is minimal due to the lenient eligibility criteria. With a gold loan, you can get the money you need in just a few hours.
When compared to obtaining a gold loan, LAP takes much longer to complete the lending process. Lenders spend a lot of time verifying property-related paperwork.
5. Repayment Tenure
A year is all it takes to pay back a gold loan. The LAP repayment period, on the other hand, can last for up to 20 years. The short repayment term of a gold loan means that the EMIs will be high. As a result, this loan is suggested for those who only need a small sum of money. LAP is the better option if you need to borrow a large sum of money. Its long repayment period will help you pay back the borrowed money more quickly by making your EMIs smaller.
6. Documentation
The application process for a gold loan is quick and easy, requiring only a few pieces of paper. A signed loan application form, two passport-sized photographs, and a copy of proof of identity and residency are all that is required of would-be borrowers. LAP requires a long list of documents when applying for a loan. A signed loan application form, proof of identity, proof of income, and proof of residency are all required.
Conclusion
It’s up to you to decide whether a gold loan or a property loan is the best option for your situation. The majority of households have gold as a financial asset. It’s easy to get your hands on and has a lot of sway in the market. The short repayment period of a gold loan makes it ideal for small loans. Because LAP has a low-interest rate and a long repayment period, it’s the best option if you need to borrow a large sum of money.
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