Emergency in everyone’s life is unpredictable; you can’t know what can happen in the coming future. During such difficult times, assets are the only thing that can be used to acquire money. In case there is any situation when you require instant money, that time mutual funds or fixed deposits are not a profitable option. But assets can immediately fetch you the required money. So, most commonly people either prefer taking a loan against gold or mortgage their property to get money. Both practices are equally effective yet opting for one option is better when you need money urgently. In this article, you will get to know which option is better: a home mortgage or a gold mortgage.
What are gold loans?
To get a loan against the gold you need to pledge some amount of gold ornaments to acquire money. Sometimes acquiring a loan against property is not possible for everyone. But if you have some amount of gold, you can get a loan against it in an emergency. Gold is a highly liquid-able metal on which you can get money without any complexity.
Another best part of a gold loan is that interest is low and tenure is also moderate. And getting a gold loan credit history is not a major factor in deciding loan eligibility. Even if you have a low credit score but a sufficient amount of gold you can apply for a gold loan easily.
What is a home mortgage?
Home mortgage is a loan provided by the lender, it may be from a bank or financial institution. To keep a home mortgage an agreement is required by the borrower to transfer the title of the property to the lender. With a condition to transfer their home back when the borrower makes the final payment of the mortgage amount.
Features of the Mortgage loan:
If you plan to apply for the mortgage loan you should be aware of few concepts that are associated with mortgage loans:
- Rate of interest is lower than the rate of interest on other loans.
- Mortgage loans are available for a longer tenure compared to other loan options.
- You can use the sanctioned loan amount for business or personal needs as well.
What kind of property can be mortgaged?
As a mortgage, you can keep a self-occupied house or another residential property like it can be a piece of land or plot owned by you. However, it is mandatory that property should be free from any kind of litigation.
How to find the best option?
When you are in a dilemma to choose which option is better out of two, check the parameters of the available loan options. You can check as per the parameter which loan option can be suitable for you. Some parameters are mentioned below which you can consider before making any decision.
Interest rate: When you think of taking any loan interest will be the most common and prime factor. Some lenders charge higher interest rates according to the payout for a loan. For instance, gold loans tend to have a greater payout than home loans.
Loan processing time: Loan processing time depends on the type of loan you are applying for. Like loan against gold is quick and easy to get without much lengthy formalities. Because gold loan eligibility criteria is lenient, compared to other loans. So, for a gold loan, you can get a loan instantly within a few hours. Whereas, for a home mortgage loan it takes time for lenders to verify all legal property documents. After completion of legal formalities home mortgage loan can be sanctioned.
Processing fees: For any loan processing lenders levy a charge which is called a processing fee. For gold loans and home mortgage loans lenders may levy processing fees up to 2% of the loan amount. But processing charges may not be the same at all institutions or banks.
Repayment tenure: Generally, repayment tenure depends on the type of loan you are taking and for how much period. If the loan payment period is longer the EMIs will be shorter, which will make it easier to repay the money before time. Most gold loans can be repaid in a year or sometimes less than a year too. Whereas, loans are taken against home generally have a repayment period up to 20 years. If you want to take out a huge amount, opting for a home loan is better than a gold loan.
Documentation: Gold loan documentation does not require various proof papers during application. A borrower needs to fill out a loan application form, two passport size photos and a copy of identity proof. But for a home mortgage loan the list of documents required is a little longer. Applicants are required to submit a signed loan application form, proof of identity, income and residence.
Eligibility criteria: Before opting for a gold loan or home mortgage loan you need to know the eligibility criteria. Like in the case of gold loan lenders do not consider much about applicant’s financial status. Because the gold loan is mostly taken for a short term and not for a very huge amount. But for home mortgage loan lenders approve some parameters before sanctioning the loan. Approvement parameters include age, income, property value, stability or continuity of business or job and credit history.
So, before opting for any loan option follow this eligibility parameter to assess yourself.
Currently, Muthoot finance, Manappuram gold loan, Augmont – Gold for all is offering loans against gold. Augmont Gold Loan offers lower interest and processing fees are also minimal.
Loan against gold or loan on home mortgage both options are right in their own way. But you need to consider the eligibility criteria and what is your purpose for taking out a loan. And select as per assessing the rate of interest, loan tenure, processing time, and other essential parameters.