Gold Loan vs Loan Against Property? What's better for urgent funds?
Gold Loan vs Loan Against Property? What's better for urgent funds?
When you have no funds and the situation is financially tight, the first option considered is to take a loan. Mainly people consider taking personal loans as they cater any kind of short-term financial necessity. But sometimes the fund you need may not be sufficient from the personal loan. In such circumstances taking a loan against property or gold loan could be a useful option. But before taking any decision you need to understand what is the purpose of the loan, and are you eligible to apply for the loan. So, before opting for any decision of loan, know the difference of gold loan and loan against property.
Gold loans
Gold loan is not a new concept in today’s time, for many years people have believed borrowing loan against gold. Generally, for short term fund requirements people often take gold loans. You can easily get a loan against gold if you have gold jewellery, coins or bars which will be kept as a mortgage with the seller. And the pledge of gold will be in the custody of the lender until the loan amount is repaid.
Benefits:
Easy availability: Getting a loan against is not a very complicated process. If you have a sufficient amount of gold through which you can gain the required funds, you can apply for a gold loan easily. The time taken to process a gold loan is shorter compared to other loan options. Which makes a gold loan an ideal option for people of any class.
Flexible repayment options: Compared to other loan options, lenders offer various repayment schemes on gold loans. Like some lenders offer the scheme of paying only interest during the tenure, and rest of the principal amount at the end of tenure. This makes it easier for the borrower to repay the loan on time.
Interest rates: Gold loans have low interest compared to personal loan and loan against property.
Loan tenure: If you want a loan for a short term, then opting for a gold loan option is a better choice. Gold loan is lent for a short time span maximum can be only 1 year.
Processing time: For approving gold loan lenders does not ask for much legal formalities. Lender just checks the quality and purity of gold and the owner's identity verification is done. Once all the criteria is verified completely, a gold loan can be sanctioned successfully within sometime.
Loan against property
Loan against property can be taken for both residential and commercial properties. Loan against property is for a long term, near about 18 years. Loan against property depends on market value, if the property market value is high you can get a high loan amount. Interest rate on loans against property is quite low in comparison to other loans.
What kind of property can be mortgaged?
You can mortgage your own house, commercial property or it can be a piece of land owned by you. But any property which you will be mortgaging should be free from any kind of mortgage litigation. The property should be clear without any legal issues.
Benefits:
Obtain a large amount: If you need a large amount opting for a loan against property is the right choice. You need to mortgage your any owned property with the lender for a specific duration. The lender then sanctioned the loan amount to you according to the current market rate.
Repay over a longer tenure: If you take loan against property you don’t have to stress about repaying loan in the short time. Especially when you take out a larger loan, paying it within a few months is not possible. Generally, the tenure is for 18 years, but it depends on the lender for how many years they give the tenure.
Tax benefits on interest payments: Another advantage of loan against property is that it allows one to enjoy tax benefits on interest payments. But it is important to know when you can enjoy the tax benefits on interest payments. Following are the points when you can get the tax benefits and when you can’t get it.
If you are using a loan amount for business purposes you claim for tax exemption. In such cases you can get benefits against interest paid and associated fees and charges incurred.
Individuals earning monthly salary can also claim benefits if the borrowed funds are utilised for purchasing another residential property.
It is important to note tax benefits are only for interest amount and not on the principal amount.
You can’t get tax exemptions if the borrowed amount is utilised for personal expenses like education, marriage, vacation.
How is a loan against property processed?
Loan against property procedure is a bit lengthy compared to gold loan. As there are many legal formalities to be completed. Following are the steps to be followed to apply for the loan.
Start by filling the application form- In the application form you need to fill in the details about your information and your current employment, and the property you are pledging as collateral. Make sure to fill in the true and correct details as they will be verified further.
Confirm details- After filling all the details a representative will contact to verify your financial and property details.
Submit necessary documents- You will need to submit necessary legal documents to the lender through which your filled details will be verified. Some common documents included are identity proof, address proof, income proof and property papers. The list of documents may differ because it depends on the lender.
Await the verification of documents- After submission of documents the lender will verify them. Which includes verifying personal, income, employment and property details with respect to the application form. Some lenders do face to face verification or may send representative to your home
Get sanction letter- After successful verification of documents lender will offer a sanction letter of approving loan against pledge property.
Get funds into account- Once the entire verification process is done your lender will proceed with final disbursal. Generally, it takes 72 hours to complete all the process and disburse the funds directly into your bank account.
Before applying for a loan against property keep this process in mind and make decisions accordingly.
Conclusion
Both gold loan and loan against property are attractive options if you are thinking of taking a loan. But to make the right choice you need to verify the above information and evaluate your requirements accordingly. Gold loan is a good option for small funds and you can get a loan instantly in time of emergency. Augmont Goldtech Pvt. Ltd. provides instant gold against loans on low interest and minimal processing fees. For a huge amount taking a loan against property is a wiser choice.