Loan Against Property or Gold Loan? What is the difference & which one should you opt for?

When preparing to take on a big financial commitment, you may find yourself wondering how to make your existing assets work for you. Many investors prefer to find value within their investments instead of opting for personal loans or credit card loans.

Loans against property and gold loans fulfil this criterion. You can get an instant loan by pledging your existing property or gold jewellery with any reputed lender following an easy process online.

Read on to know how these loan options differ from one another and how to select the best option for your needs.

Loan Against Property vs. Gold Loan: Key Similarities

There are a few common features shared by loans against property and gold loans. These are as follows:

Existing Asset Used As Collateral For a Loan

Both gold loans and loans against property are secured loans, meaning that the lender extends credit against the asset you pledge as collateral. For a loan against property, this can be fully constructed residential property, commercial property, special use property or a plot of land. For a gold loan, this can be gold jewellery ranging from 18 to 24 karats and bank-minted coins.

Better Interest Rates Than Personal Loans

The interest rate for a personal loan starts at 9.75% p.a. and can go up to 49.5% p.a. [EW1] Due to the security of the collateral, interest rates for secured loans are much better positioned. This way, you can get affordable financing for all your needs and repay stress-free.

No End-Use Restrictions

Much like personal loans, neither of these credit facilities put restrictions on how the funds should be utilised. You can use the funds received from both these loans to meet a variety of financial needs such as to fund a child’s education or marriage, for travelling, for business expansion, for renovating your house or getting medical surgery and more.

Loan Against Property vs. Gold Loan: Key Differences

To decide which loan offering is better suited for your needs, make sure to understand the key differences between the two. These are as follows:

Characteristics	Loan Against Property	Gold Loan
Flexibility in Loan Amount	The loan amount is sanctioned by lenders depending on their assessment of the value of your property and your income levels. The loan-to-value ratio is decided by the lender based on internal protocols and is usually up to 75% of the property or land value.	The loan amount is dependent on how much gold you pledge and its purity. A loan-to-value ratio applies here as well. However, you have the flexibility to calculate the market price of gold and submit as much gold as needed to avail the amount you need. RBI guidelines allow lenders to offer a maximum of 90% [EW2] of the value of gold as a loan. Generally however, the actual loan-to-value ratio ranges between 55% to 75%.
Loan Processing Time	The processing time is much longer due to the site visits, property valuation, documentation and other formalities.	Gold loans are pretty much instant loans. Once you submit the gold, it is evaluated within a matter of hours, and the amount is sanctioned by the lender.
Interest Rates	Current interest rates range from 8.50% p.a. to 18%[EW3] p.a.	Current interest rates range from 7.20% p.a.[EW4] to 24% p.a.[EW5]
Timeline	The repayment tenure can go up to 20 years[EW6] .	The repayment tenure ranges from 3 months[7] to 4 years.[8]
Loan Limits	Minimum loan amount – ₹5 Lakhs Maximum loan amount – ₹25 Crores[EW9]	Minimum loan amount – ₹5,000 Maximum loan amount – ₹2 Crores[EW10]

Which One Should You Opt For?

A gold loan is better suited to meet urgent, short-term fund requirements for small amounts. For larger sums which you want to pay off across a lengthier tenor, you can opt for a loan against property.

Keep in mind that gold loans allow a certain amount of flexibility, owing to your ability to choose how much gold to submit as collateral. In an emergency, this offers assurance that you can secure the funds required to fulfil your needs. However, the loan limits are lower than that of a loan against property. Of course, this is also based on your property value as per location and other factors.

No matter which option you choose, you can get some of the best offers on the Bajaj Markets App, one of the premier loan apps in India. This digital platform has a range of financial products, all in one convenience app, and offers easy comparison and information too. Download the app on the Play Store or App Store and use it as a loan assist to get instant funds in a few easy steps.