Own a House Property and Gold Both? Find Out Against Which Asset You Should Take a Loan
Given that gold loans and loans against property share many comparable characteristics, such as the freedom to spend loan amounts without restrictions, secured nature of loan, and high ticket amount, people who require a significant amount of money tend to be unclear which alternative to take as a loan option when in need of funds. Even people who have gold in their possession and are eligible for low IIFL gold loan interest rate can get confused when they are simultaneously eligible for loans against property. They usually struggle to make a decision regarding which loan to take.
The following article thus compares gold loans and loans secured by property to help you make a suitable choice.
Duration of the Disbursement
Compared to other loan types, the loan against gold has one of the fastest disbursement times. The applicant frequently receives the funds quickly after submitting the loan application. The borrower’s credit history, which is hardly ever taken into consideration during the assessment process, is prioritised over the quality of the collateral. In comparison, the loan against property disbursal process typically takes two to three weeks, depending on the property and loan against property eligibility.
This is done so that lenders can verify your ownership of the underlying property, that it is currently valued at what you owe on it, and that all required paperwork has been confirmed before disbursing the loan. Therefore, for borrowers who require immediate access to funds, loans secured by gold would be preferable than loans secured by real estate in terms of processing time.
Time Frame for Repayment
A small minority of lenders offer periods of up to four or five years, although the bulk of lenders offer terms of three months to three years. Loans with gold as collateral usually have shorter payback terms.
Even though only a few creditors offer terms of up to 20 years if you also meet other requirements for Loan Against Property Eligibility, Loan Against Property repayment periods might be as long as 15 years. When compared to IIFL gold loan, LAPs frequently offer much longer payback durations, which may make them a great choice for borrowers who wish to keep their EMIs low over the course of a protracted loan repayment period. On the other hand, given that longer repayment terms also result in higher loan against property interest rates, a IIFL gold loan may be the more cost-effective choice for borrowers who are confident they will be able to make repayment of their loan within a shorter tenure after evaluating their capacity to make repayments.
The principal amount of the loan
The evaluation of the gold as collateral and the loan-to-value (LTV) ratio that the lender sets are the two main factors that define the size of a loan secured by gold. The RBI restricts LTV ratios for IIFL gold loan to 75%. This ceiling may rise or fall. The loan’s size could range from 1000 to 1.5 crores, depending on the lender. In contrast, lenders commonly offer up to 50% to 70% of a property’s market value as collateral for a loan when it comes to loans secured by real estate, depending on the borrower’s ability to repay the loan, their income, the property being mortgaged, and other factors.
When applying for a loan with real estate as collateral, bear in mind that the lender will assess the asset’s fair market value based on a variety of elements, such as the property’s location, age, and nearby infrastructure.
Loan interest rates
IIFL gold loan interest rate are more or less similar to those of loans secured by property.
Depending on the lender’s assessment of the borrower’s creditworthiness, the length of the loan term, the loan amount, and the borrower’s desired form of repayment, IIFL gold loan interest rate can range from 8-9% to 26-29%. For loans with larger amounts and longer repayment durations, many lenders impose higher interest rates as it involves relatively higher risk.
However, depending on the lender, how good or bad your credit evaluation turns out to be, and the type of property you are using as collateral, the interest rate on a loan against property can range from 8 to 9% to 13 to 14% annually. Owner-occupied mortgage rates may be more affordable than those for rental or investment properties.
Options for flexible EMI payments
The repayment terms for gold loans are typically more generous than those of conventional loans. In addition to the typical method of repayment known as EMI, many creditors permit borrowers to repay only the interest part of their loan on a monthly basis, with the entire principal amount payable at the loan’s maturity date. However, some lenders provide the opportunity to pay down the entire interest component at the time the loan is approved. At the conclusion of the loan period, the principle amount is normally repaid. When the loan term is up, several IIFL gold loan choices allow borrowers to pay back both the principal and the interest portion of the loan.
While others frequently offer LAP in the form of an overdraft facility, some of them do as well. EMI payments can commonly be made in the form of EMIs at the applicable loan against property interest rate, according to lenders. Due to the variety of non-EMI repayment methods available, gold loans may be a better option for persons with short-term cash flow concerns and limits.
Processing fees and expenses
After taking into account additional criteria for Loan Against Property Eligibility, processing fees of up to 2% of the loan amount may be assessed. Some lenders impose flat fees for these loans that start at little Rs 10, even though processing charges for gold loans typically range from 1% to 2% of the borrowed loan amount. Therefore, loan applicants must be careful to consider the processing fees when determining the true cost of obtaining these large ticket loans. This is because the final cost of the loan might be significantly affected by even a modest change in the processing charges.