When faced with a financial emergency, many people seek assistance from personal loans. These loans are specifically designed to help you deal with a financial emergency. However, its hefty gold loan interest rate makes it fairly hard on the wallet. What if you’re not even eligible for a personal loan? What if you need a loan amount that is much more than what you qualify for with a personal loan? In such a scenario, some people think of leveraging accumulated cash. However, liquidating assets such as mutual funds and term deposits is not always an option.
So, what should one do to get out of such a situation? A muthoot fincorp gold loan or a loan against property (LAP) are two such solutions that most people choose to get out of. If you’re wondering which of the two will be more beneficial in your situation, you will get to know about it in this blog.
Collateral: Under Secured loans, collateral is retained by lenders until the loan amount (including interest and other costs) is entirely paid off. Because both the loan against property and the muthoot fincorp gold loan are secured loans, you must provide the lender with collateral. To qualify for a gold loan, you must pledge gold such as jewelry and coins. LAP, on the other hand, necessitates the mortgaging of your commercial or residential property. If you are unable to repay the loan for whatever reason, your lender will use the pledged collateral to recover the outstanding loan amount.
Rate of Interest: The gold loan interest rate is the most significant consideration for all potential borrowers. The interest rates on gold loans are fixed, whereas the interest rates on property loans are both variable and fixed. Fixed interest rates for gold loans normally range from 9.24 percent to 26 percent, while fixed interest rates on real estate loans often range from 9.6 percent to 11.5 percent.
Eligibility Criteria: You must first be eligible to acquire a loan. Lenders are less concerned with the applicant’s occupation, credit score, and other considerations when it comes to muthoot fincorp gold loan. This, in turn, benefits all potential borrowers, particularly those in financial distress as choosing a gold loan increases their chances of having their loan applications approved. Most lenders will provide a gold loan to anyone between the ages of 18 and 75 as long as the gold jewelry they promise fits the lender’s requirements.
LAP qualifying requirements, on the other hand, are stricter than those for gold loans. It varies greatly from lender to lender, but all lenders consider age, income, property value, previous liabilities (if any), business stability or continuity, and credit history before issuing a loan application.
Time Required for Loan Processing: Muthoot fincorp gold loan are quick and easy to obtain, making them an ideal financial option for those who need money immediately. Because of the moderate eligibility criteria, the documentation is minimal, which speeds up the loan procedure. You can get a gold loan approval in as short as a few hours, almost instantly.
On the other hand, the processing period for a LAP loan is lengthier than the processing time for a muthoot fincorp gold loan. All property-related papers must be checked by lenders, which takes time. Furthermore, if the property has many owners, each will be required to file a NOC (No Objection Certification) in order to secure the loan, which will increase the processing time.
Processing fees: To process any loan, lenders charge a fee known as a processing fee. For muthoot fincorp gold loan, lenders may impose a processing fee of up to 2% of the loan amount. Some lenders do not impose loan processing costs. Lenders charge a processing fee of up to 2% of the loan amount for LAP, which varies depending on the lender’s regulations and terms and conditions.
Repayment tenure: The repayment term is the amount of time you have to pay back the loan to the lender. As the loan repayment period lengthens, the EMIs calculated as per gold loan interest rate will decrease, making it easier for you to return the borrowed funds. Choosing a longer repayment time, on the other hand, will result in a higher overall interest payment. LAP repayment tenure, on the other hand, might last up to 20 years. Because of the short repayment duration, the EMIs on a gold loan will be high. As a result, anyone in need of a small sum of money should opt for this loan. For a significant loan amount, LAP will be a preferable option. Your EMIs would be shorter due to the long repayment time, making it easier to return the borrowed funds.
Documentation: The documentation for a gold loan is simple, and the application process does not require a stack of paperwork. Potential borrowers must submit a signed loan application form, two passport-size photographs, and a copy of proof of identity and domicile. When applying for a loan with LAP, the list of documentation necessary is a little longer. A loan application form signed by the borrower, proof of identity, proof of income, and proof of residency are all required.
How Gold loan is better?
In 2020, the Reserve Bank of India issued a circular lowering the gold loan LTV ratio from 75% to 90%, allowing borrowers to earn a better value for their gold jewelry. Obtaining a large sum of money in an emergency might be difficult, but gold loans provide this at short notice, and such urgent needs can be addressed with ease from the comfort of your own home. Gold loans, whether for a medical emergency or to fund a child’s education, can thus be a simple and significant alternative or at least better than LAP due to low gold loan interest rate.
So we are sayingYour needs will determine if a gold loan or a loan against property is preferable for you. Gold is a commodity that the majority of people own. It has a high market value and is quite liquid. Because of the short repayment period, a gold loan is suitable for small loan amounts. LAP is great for borrowing large sums of money because of its low gold loan interest rate and long repayment duration. A gold loan should be your first choice when you have a financial emergency because it has fewer qualifying conditions, fewer documentation, and takes less time to process.