Which one to choose Gold Loan or Loan Against Property?

Which one to choose Gold Loan or Loan Against Property


People often face a dilemma when choosing the right loan plan as they become concerned about the way they will repay it. With a varied number of options available in the market, choosing the correct loan option becomes a tedious job. Moreover, the type of loan plays a vital role in determining the style of repayment.

Gold loan or loan against property forms the two most popular loan options in the country. The features associated with them make them a better choice among many options in the market. However, choosing between the two can also be a difficult task. So, to clear the confusion, a comparative study of loans against gold and property is given in detail. 

Loan Against Property

The Loan Against Property, more commonly known as LAP, is a type of mortgage loan. The borrower needs to place property as security to the lender. You can provide any personal or commercial property to get the loan. Some leading features of LAP are given below in detail:

  • The interest for the LAP generally ranges between 12% to 16%. This is comparatively much lower than the interest rates of the personal loan as LAP is secured in nature. As a result, it will be easier for you to repay the loan within the tenure. 
  • The capital of the loan will depend on the exact worth of the property that is placed as collateral. You can expect to get a high principal amount for LAP if the property has a high worth in the market. 
  • Leading NBFCs and banks in the market provide loans against property. The lending entities majorly accept newer properties as it would be easier for them to resale them in case the borrower fails to repay the loan. 
  • The process of getting the Loan Against Property is time-consuming. It is because the lender has to verify the collateral thoroughly. The lender checks the authenticity of the documents related to the property and the resale value before giving the loan.

Gold Loan

Gold Loan

Gold loan is another kind of mortgage loan where the lender organization only accepts gold ornaments as the security for the loan. Some banks in India publish gold coins which can be placed as collateral if you are taking a loan from the same bank. Most NBFCs in the country deal with gold loans. Some features of the gold loan are given below:

  • Applying for a gold loan is quite an easy process. You can directly visit the lender organization with your gold assets to get the gold loan.
  • You can get up to 70% of the net worth of pure gold present in your collateral as the principal amount. 
  • The interest rate in the case of the gold loan is lower as you place the collateral with the lender. It is taken by most people who have a lot of gold ornaments to repay in with ease.
  • People with poor financial conditions can take gold loans conveniently. The lender organization dealing with the gold loan does not check the credit score or financial history of the borrower. 
  • You can get the principal for the gold loan instantly as the lender will only verify the gold ornament before giving you the money. In some cases, you can get the loan on the same day.
  • Read Also: Loan Against Property

Which one to choose?

It depends on the borrower and his financial condition to choose between a gold loan or LAP. Here, some insights are given that will help the borrowers to choose from either of the two options above easily.

Availability of assets

One must be aware of the fact that mortgaging fully depends on the availability of the assets. If you are choosing a LAP, make sure you restrict mortgaging the property you live in. In the same way, you must not put all the gold ornaments you have as collateral. In the case of defaulting a repayment for a long time, you might lose your asset.

Monthly Interest

Monthly Interest

Check if the monthly interest and the repayment structure match your affordability. You should avoid taking the loan if you are not confident about making all the repayments on time and escape from the debt trap. 

Always consider mortgaging loans as the last option. Try for a personal loan initially if you suddenly face a cash crunch. 

When compared, a gold loan can be considered a safer option rather than the Loan Against Property. You might face a toll if any of your property gets forfeited by the lender. However, it depends on your risk appetite.

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