Finance

Which Loan to Take If You Have a Property and Gold to Pledge

The fact that there are no limits on how the loan money can be used, that it is secured, and that it is possible to get a big loan amount against pledging collateral make gold loans and LAP the best ways to pay for large personal or business expenses like a child’s education, wedding, or business expansion. But there are other differences between gold loans and LAP that can make some borrowers better off than others.

Here, let us compare a gold loan if taken at hdfc bank gold loan interest rates or icici bank gold loan interest rates and LAP to help you decide which one is best for your big-ticket funding needs:

Time for processing the loan

Gold loans are one of the loans that can be paid out the fastest. Most of the time, they are given out within a few hours of the loan application. The process of evaluating a loan is mostly based on how good the collateral is. The credit profile of the borrower is almost never, if ever, a major factor. LAP, on the other hand, takes about two to three weeks to pay out because the lender has to check all of your property-related documents and do a technical study to make sure you own the property and that it is worth what you say it is. Because of this, people who need money right away would find that gold loans are faster to process than LAP and may involve lower rates in the form of icici bank gold loan interest rates.

Payment Tenure

In most cases, the length of time you have to pay back a gold loan is short. Most lenders will give you up to 1–3 years to pay it back, but a few will give you up to 4–5 years. When it comes to LAP, most lenders offer repayment terms of up to 15 years, while a small number of lenders offer terms of up to 20 years. LAPs can be a good choice for people who want to pay back their loans over a longer period of time but still want to keep their monthly payments low. But since longer repayment terms also mean higher interest costs from applicable hdfc bank gold loan interest rates, a gold loan would be a better choice for people who are sure they can pay back their loan in a shorter amount of time based on their ability to do so.

The maximum amount of loan limit

For gold loans, the loan amount is mostly determined by how much gold is put up as collateral and the loan-to-value (LTV) ratio that the lender sets. LTV ratio is the amount of the loan that is based on the value of the collateral. The LTV ratio of gold loans can be very different depending on the lender and the way the loan is paid back. However, the RBI has set a maximum LTV ratio of 75 percent for gold loans. Just like icici bank, gold loan interest rates can vary for different customers, and the loan amount can vary and be anywhere from Rs 1,000 to Rs 1.5 crore, depending on the lender. In a LAP, on the other hand, lenders usually give up to 50–70% of the property’s market value, depending on the applicant’s ability to pay back the loan, their income, the property that will be mortgaged, etc. Taking into account all of the above factors, the loan amount can range from Rs 2 lakh to Rs 10 crore. Keep in mind that when figuring out how much the property is worth on the market, lenders look at many things, such as its location, age, and the infrastructure around it.

Applicable rates of interest

Hdfc bank gold loan interest rates can be anywhere from 7% to 29% p.a., depending on how risky the borrower is in the eyes of the lender, the length of the loan, the amount borrowed, and the type of repayment chosen. Some lenders tend to charge higher interest rates for bigger loans and longer periods of time to pay them back. But with a LAP, the interest rates can be anywhere from 8.20 percent to 13.85 percent per year, depending on the lender, how risky they think your credit profile is, and what kind of property you put up as collateral. Some lenders tend to offer lower interest rates for homes that are owned and lived in by the borrower than they do for commercial properties or homes that are not owned and lived in by the borrower. Also, icici bank gold loan interest rates can also change based on how much the borrower wants to borrow and for how long.

Flexible options for repayment

In gold loans, lenders offer more ways to pay back the loan. In addition to the usual EMI method of repayment, many lenders also let borrowers pay only the interest each month, leaving the principal to be paid at the end of the loan term. Some also let borrowers pay the interest part of the loan up front when the loan is approved and the principal amount at the end of the loan’s term. Some gold loans also give you the option to pay back both the principal and the hdfc bank gold loan interest rates at the end of the loan term. Most lenders will let you pay back a LAP through EMIs, but some will also let you pay it back through an overdraft facility. Due to the many ways to pay back gold loans that don’t involve EMIs, they may be a better choice for people whose short-term cash flow doesn’t match up with their repayment needs.

Fees and charges for processing

Most lenders, even those who offer low icici bank gold loan interest rates, charge processing fees of between 1% and 2% of the loan amount for loans secured by a property. Processing fees for gold loans are usually between 0.5% and 2% of the loan amount, but some lenders charge flat fees that start as low as Rs 10. So, people who want to borrow money should make sure to include the processing fees when figuring out how much it will cost to borrow. Even a small difference in these fees can have a big effect on the overall cost of the loan.

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