Sometimes personal loans are not fit for some situations where gold loans or property loans could severe the needs. Further, here we will discuss the differences between property loans and gold loans so it is easier for you to choose amongst them.
Advantages and disadvantages-
Easy availability- Availability of gold loans is easier as compared to that of personal loans, which makes it more suitable and attracts more clients. Gold loans are getting more markets as the non-banking financial companies also offer loans against gold. Moreover, the processing time needed for gold loans does not take long and once the approval comes from the institution money is credited within a period of 24 hours. Gold loans thus cater to financial assistance within a short period of time which personal loans or property loans might not be capable of. SBI gold loans provide loan on an easy interest rate as well as within a calculated time period
Availability of flexible schemes- There are various options when it comes to the repayment of the credit amount. One can choose to pay in EMI installments, foreclose accounts by paying the credit before time, and even pay the interest monthly and deposit the principal amount during the maturity of the loan. For example, while availing of a gold loan you will be provided with options for repayment where you can choose to pay the interest rate that is to be charged on the principal amount and pay the credited loan amount while the tenure comes to an end. There is another suitable option of repayment which is as per EMI installment, where one can set a tenure period within which the loan amount has to be repaid along with the rate of interest charged by the particular institution.
Limited repayment woes- If a situation arises where an individual is not able to pay back the loan amount the worst thing that could happen in case of a gold loan scheme is that the bank can claim on your gold assets and jewelry that had been provided as collateral. In the case of personal loans or property loans if not repaid there could be serious consequences that might affect one’s personal life. If property loans are not repaid within the given tenure then the bank might claim the property as well leaving one homeless.
Rate of interest- when the personal loan interest rate comes along within a range of 15% to 27%, gold loans come within an interest rate starting at 9.75% and having a maximum of 16% offered by various financial institutions. Although interest on gold loans have come at par with that of personal loans with falling gold loan prices and RBI seeking NBFCs regarding maintenance of a minimum LTV for the gold loans.
Low loan to value and short tenure- According to latest reports the Reserve Bank of India had exceeded the loan to value for gold loans up to 75%, which means that if you avail for a gold loan with gold assets worth INR 1 lakh then you will be getting an approximate amount of INR 75,000 as credit. After considering the processing fees and other charges the loan amount might get reduced. Further gold loans have a short tenure with a maximum time period of a year. Thus you should only approach for a gold loan if you have the capacity to pay off the loan amount within one year along with its interest value. In the case of property loans, the loan value is calculated according to the market price of the property and one’s repayment capacity.
These tips and discussions regarding gold loans might benefit you in the future while applying for a gold loan and even during the repayment tenure.
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