Gold Loan or Loan Against Property – Which Is a Better Choice?

Exigencies are an unavoidable part of life. Various financial setbacks may at times propel you to opt for financial help from financial setups. When it is about addressing immediate needs, individuals often are confused between gold loan and personal loan or availing loan against property. However, a personal loan tends to come up with an immense high rate of interest and stressful educational qualification criteria. Availing a personal loan instantly in such scenarios can be challenging. Loan against property and gold loan are best financial options in such scenarios.

You may wonder, what exactly are these loan types and which option is better? Read on to know.

Understanding what is a gold loan?

A gold loan whether from SBI gold loan, Punjab National Bank or Bank of Baroda are availed from lenders by offering gold articles or ornaments in the form of security or collateral. Generally, you are provided a specific percentage of the gold’s value in return. Lenders later will charge a rate of interest and once you repay the amount in total, you would get back your security i.e., the gold that you provided to avail the loan. Note that as gold loan is secured in nature, the interest rate charged on it is lower than unsecured loan options like personal loan. For instance, SBI gold loan interest rate begins from 9 per cent per annum onwards.

So, this is a secured loan type. As evident from the term, you must pledge gold jewelry as security to opt for financial help. Lenders assess the pledged good’s purity and the existing loan to value (LTV) ratio to process the final loan proceeds.

Understanding what is a loan against property?

A loan against property may be availed easily by mortgaging your residential or commercial property. Based on the property’s existing market price, a specific percentage would be allocated by a bank as loan.

So, this is a kind of mortgage loan you can consider by mortgaging property. As mentioned above, you can offer both your residential and commercial properties in the form of security or collateral for a loan. Financial lenders offer a particular percentage of property’s value in the form of loan. This assessment is based on the security’s present market value.

So, which option is best for you? Highlighted here are the key differences between both the financial options so that you can make an informed decision. 

Eligibility parameter – 

Eligibility highly matters when it comes to determining what credit option you must apply for. When it is about a gold loan, lenders generally do not fret a lot regarding the applicant’s profession, score, and various other details. This ameliorates your chances of securing an approval for the application.

Eligibility criteria for loan against property is stricter. Lenders factor in aspects such as age, income, credit profile and score before offering the money. This makes the procedure of becoming eligible for a loan against property more difficult than a gold loan.

Interest rate – 

The interest rate dictates the amount you must repay for years to come. Generally, a gold loan is provided by financial institutions at a fixed rate of interest. In contrast, a loan against property is offered at floating and fixed interest rates. As multiple banks offer gold loans, ensure you assess all the possible rate of interest levied before making the decision.

Loan processing time frame – 

In comparison to loan against property option, gold loan is way faster to avail, which comes across as a prudent financial solution when you need funds on immediate basis. With lenient loan eligibility parameters and lesser need for documentation, the loan procedure here can be way quicker. Same as instant loans, you can get approval for a loan against gold on the same day of submitting the application form.

With a loan against property, lenders need time to authenticate property linked documents and get the NOC from the owners. This may enhance the processing time.

Processing charges – 

Many lenders charge a processing charge on loans you take up. This is true for the gold loan and loan against property too. Before placing an application for a loan, ensure you evaluate any additional charges that you might be incurred in the process. Moreover, make sure that your loan application is not turned down as you would not get the refund in the scenario of any rejection.

Repayment time-period – 

The longer is your repayment tenure, the lower would be your EMI proceeds. However, this would enhance the overall amount you may have to pay as interest constituent. Owing to the flexibility, a gold loan may be repaid in a year. The loan against property period can run into decades, however this would be at a lower loan EMI proceeds. With short gold loan tenure, they would even hold a high EMI.

Gold loan tenures will work best if you need smaller amounts as the loan EMI would lower accordingly. When borrowing a considerable amount, then a loan against property may be looked upon as the best option.

Evaluating your needs and potentials – 

When witnessing the requirement for immediate funding, loan against properties and gold loans can be great options. Select the option that works well for you, keeping in note of the rate of interest, instant availability, and loan tenure. Gold loans stay an attractive financial choice as gold is often present in most of the Indian households. However, if it is a substantial amount that you want to take up as a loan, then you can opt for a loan against property option.


Owning substantial assets often makes secured credit option as a prudent way out in the course of financial exigencies. Advances like loan against property and gold loan are the popular secured borrowing loan types with no restriction on the end usage of the loan proceeds.

Detailed awareness and knowledge about both the loan kinds is a must to make the correct choice during any financial crisis. To assist you with this, discussed above are the crucial features and the key distinctions between loan against property and gold loan.

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