People who need a lot of money often don’t know which option to choose between a gold loan and a loan against Property because they have a lot in common, like the ability to use the money however they want and the fact that the money is secured.
So, here is a comparison between a Loan against Property and a bajaj gold loan to help you decide which one to get.
Time Needed to Pay Out
Compared to other kinds of loans, the time it takes to get paid back on a bank of Baroda gold loan is one of the shortest. After the loan application has been sent in, the borrower usually gets the money within a few hours. Most of the time, the review is based on the quality of the collateral, and the borrower’s credit profile gets almost no or almost no attention at all. Loan Against Property, on the other hand, usually takes around two or three weeks to pay out.
This is because lenders have to check all the papers associated with the Property before giving you the loan. They also have to do a technical study to make sure you own the Property and to find out how much it is worth on the market right now. So, people who need money right away can benefit from a loan against gold more than they could from LAP in terms of how long it takes to get the loan.
Length of Time to Pay
When it comes to loans backed by gold, the terms for paying them back are usually on the shorter side, with most lenders offering terms of up to one to three years and only a few offering terms of up to four or five years.
When it comes to LAP, you can have up to 15 years to pay it back, and a few lenders will give you up to 20 years. LAPs often have much longer payback periods than bajaj gold loan, which could make them a good choice for borrowers who want to keep their EMIs the same over a longer loan repayment period. But since longer repayment terms also mean higher interest costs, a loan against gold may be a relatively cost-effective option for borrowers who are sure they can pay back their loan in a shorter amount of time after taking into account their ability to do so.
How much was borrowed?
When it comes to thebank of Baroda gold loan, the loan amount is mostly based on how much the gold used as collateral is worth and the loan-to-value (LTV) ratio that the lender sets. LTV ratios for gold loans are capped by RBI at 75%. This limit is not set in stone. Depending on the lender, the loan amount could vary widely. When it comes to Loan Against Property, however, lenders usually give up to 50–70% of the Property’s market value, depending on the applicant’s ability to pay back the loan, total income, the Property which will be mortgaged for LAP, etc.
When you take out a Loan Against Property, keep in mind that when figuring out the Property’s fair market value, lenders look at a number of factors, such as the Property’s location, age, and nearby infrastructure, among others.
Rates of interest that can be charged
The interest rate on a bajaj gold loan can be anywhere from 7% per year to 29% per year, depending on how risky the lender thinks the loan application is, how long the loan is for, how much the loan is, and how the borrower wants to pay it back. Some lenders have a habit of charging expensive interest rates for loans with larger amounts and longer payback periods.
On the other hand, the interest rates for LAP can be anywhere from 8–9% to 13–14% per annum or maybe higher, depending on the lender, the associated risk assessment of the borrower’s credit profile, and also the type of residential/commercial/industrial Property which has been pledged as collateral. When compared to the bajaj gold loan interest rates paid on commercial properties or homes that aren’t the borrower’s primary residence, the interest rates on homes that are the borrower’s primary residence tend to be lower.
Payment options for EMI
Most gold loans, including a bank of Baroda gold loan, have a more flexible repayment plan than other types of loans. In addition to the usual way of paying back a loan, which is called EMI, many creditors allow borrowers to only pay the interest on their loan each month, with the rest of the principal amount due when the loan is paid off. Most of the time, the principal amount is paid back at the end of the loan term, but some lenders give borrowers the option of paying off the interest portion in full when the loan is approved. When the loan term is over, there are several types of gold loans that give borrowers the option to pay back both the principal and also the interest.
LAPs are usually paid back in the form of EMIs, but some lenders also offer LAPs in the form of an overdraft facility. Due to the fact that there are different ways to pay back gold loans which are not based on EMI, people with short-term cash flow problems and restrictions may find that gold loans work better for them.
Fees for processing
Processing fees of up to 2% of the total loan amount can be charged by LAP and other lenders. Processing fees for gold loans are usually between 0.5% and 2% of the loan amount, but a few lenders charge flat fees for these loans starting as low as Rs 10. So, people who want to get a bank of Baroda gold loan need to make sure they figure in the processing charges when figuring out how much it will really cost to get these big loans. This is because a small change in the processing charges can make a big difference in how much the loan will cost in the end.