The property mortgage and the gold mortgage are both the kind of mortgages that people keep for availing liquid cash in hand while in need of money. Loans can be availed on an immediate basis by mortgaging the property or else gold on an immediate basis from the bank. The mortgage loan is majorly taken by the people who need money on an urgent basis. The funds raised through the mortgage can be utilized for paying medical bills, for marriage purposes, or travel needs as well. Loans can also be taken due to the loss suffered in the business or else for the repayment of liabilities in the business. In the case of a property mortgage, the borrower has to submit the property documents with clear titles to the lender against which the loans can be availed. While in the case of gold loans the borrower has to mortgage the gold either in the form of jewelry or else gold bars or gold coins. Also, the receipts for the gold needs to be submitted to the lender while mortgaging the gold and availing money in exchange.
In the case of a gold loan, the cost of the actual purity of the gold is taken into consideration while estimating the value of the mortgage. While in the case of the property the borrower has to submit the property documents with clear titles to the lender to avail liquid cash in hand. The clearance for the loan against property takes almost a week to get the loan cleared, while the gold loan can be approved within few hours of the gold being submitted. There are multiple uses for which mortgages can be used for funding. The borrower can use it in emergency needs wherein paying the amount becomes difficult due to the high expenditure required. On the gold mortgage around 75% of the value can be utilized for raising funds while in the case of the loan against property 75-80% of the property value can be utilized as loans. The funds which can be raised in case of the loan against property are more as compared to the gold. As in obvious cases, the value of the property is higher as compared to the value of the gold. The gold loan tenure is also lower as compared to the loan against property.
Comparison between gold loan VS loan against property:
Features of gold loan:
- In the case of a gold loan liquid cash can be gained quickly as the inspection about the purity of gold is done and post to that the cash can be handed over immediately to the borrower within few hours.
- The loan to value ratio is 75% of the gold value.
- The interest rates are charged in the range of 12-24% depending upon the lender.
- The processing fees are nil most of the time for the gold loans.
- Banks may charge 1% of the interest as pre-payment charges or some may charge nil. It is expected that the borrower should wisely identify the lenders.
- In the case of gold loans, no income proof is required for obtaining loans.
- The tenure of the loans is a maximum of 1 year in the case of gold loans.
- Tax exemption cannot be gained in the case of gold loans.
- Physical submission of gold is required along with the receipts for the gold.
Features of loan against property:
- In the case of the loan against property, it takes 7 working days to get the loans approved. The bank does the third-party verification of the documents before the approval of loans. Also, physical verification of the documents is done before processing the loans. The condition of the property and the overall locality nearby is verified by the bank officials for the estimated cost of the property.
- The LTV ratio is 75-80% of the property value.
- The tenure of the loans is higher than the gold loans. The tenure is usually 15-20 years depending on the lender.
- The bank may or may not charge the pre-payment penalty in case of early repayment of loans.
- The bank in case of a loan against property may still ask for income proof as the loan should not turn into bad debt.
- The tax exemption can be gained only if the amount raised is utilized for the purchase of the property. Also, the tax benefit can be gained only in case of the interest repayment, not on the principal amount. Amount if spent for any other miscellaneous purpose else than the purchase of property then in that case tax exemption cannot be gained.
- Physical possession of the property is not required in case of a loan against the property. Only documentation needs to be submitted in the case of LAP.
Thus availing mortgage against gold loans or the property depends upon the individual whether the borrower has gold to mortgage or else property is available for a mortgage. Also, the requirement of the amount is necessary to be known like in case of requirement of lower value of loans gold mortgage is beneficial while in case of the property mortgage higher value can be raised.