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A loan is a good option for arranging money in difficult times like medical emergencies or financial crises. There are two types of loans, secured and unsecured. When an asset is pledged against the loan, it is called a secured loan. People prefer to take secured loans because the interest rate is lower and the loan amount disbursed is higher. While giving secured loans, banks usually pledge assets like gold, securities, and property.
Both gold loan and loan against property are secured loans. In a gold loan, the loan is obtained by pledging gold jewellery or coins, while in a loan against property, land, house or other commercial property has to be mortgaged.
Let us understand the difference between a gold loan and a loan against property.
Loan Amount
In the case of a gold loan, the loan amount is decided based on the market value of the gold being pledged. It does not include the ancillary value of precious stones or making charges. The value of gold is calculated based on purity and weight. Up to 75% of the market value can be availed as a loan. Whereas, in the case of a loan against property, the sanctioned amount of the loan can be up to 75%. If the market value of the property is high, then the loan amount can be increased.
Interest Rates
A loan against property is cheaper as compared to a gold loan. Interest rates in gold loans usually range from 9 to 28%. This is due to the high volatility in the gold market. Whereas, the interest rate on loan against property ranges from 9 to 12%.
Repayment Tenure
The tenure of a gold loan varies from 12 months to three years. It depends on the bank or institution disbursing the loan. Whereas, the repayment period of a loan against property can start from 12 months and go up to 15 years.
Loan Processing Time
A gold loan is available faster than a loan against property. Banks or financial institutions sanction loans immediately after computing the value of gold. It takes a little longer to get a loan against property as banks do a complete background check including the title of the property being mortgaged.
To know more about gold loans or apply for a gold loan, click here: IIFL Finance