In case of any financial emergency, people tend to apply for personal loans that are tailor-made to support their sudden financial crunches. While some resort to personal loans due to the convenience of availability the approvals require a strong financial record and good credit score. Being unsecured loans, personal loans also come with higher interest rates.

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Those who have some assets to mortgage against loans can opt for secured loans, which come at a comparatively cheaper rate of interest.

Gold loans and loans against property are the two most common types of secured loans.

However, choosing one of these could be tricky at times as people often wonder about which one of the two will be more affordable and cheaper.

Given here is a proper comparison between the two that may help you to understand and make an informed choice.

Gold Loan: Interest rate, EMIs and other key details

Gold loans have always been a part of the unorganised sectors and now it has also become a part of the organised sector. Basically availed in exchange for gold ornaments or gold coins as collateral, borrowers can obtain loan amounts of up to 75 per cent of their pledged gold's valuation. These are usually short-term loans with reasonable interest rates and lenders are not strict about the borrower's credit history or CIBIL score.

Loan against property: Key details you should know

Borrowers can avail a loan against both residential and commercial properties as security. The interest rates for a Loan against property are not fixed as they are mostly tendered at floating interest rates.

Gold Loans vs Loan Against Property: Which one is better?

1. Loan Amount: In both cases, borrowers pledge their self-owned gold or property to avail the loan, but the loan amount is decided based on the nature of the collateral. The total cost of the pledged gold determines the amount of the gold loan, while the value of the pledged property influences the loan amount for LAPs.

2. Interest rate: Interest rates in the case of gold loans are usually fixed while in the case of Loan Against Property it could be floating interest rates.

3. Eligibility: For gold loans, one can easily pledge their self-owned jewellery or gold coins for loans, while for LAPs, the eligibility criteria requires more detailed information like the applicant’s age, income, property value, nature of employment, existing debts and credit score, among others.  

4. Loan Processing Time: While comparing the time required for loan approval in both cases, gold loans are processed faster and with minimal paperwork. However, a Loan Against Property requires a longer processing time as lenders need to complete mandatory checks on the property.

5. Repayment: The repayment tenure for a gold loan is usually shorter than a Loan Against Property. While gold loans can extend upto three years to five years, LAPs can continue for 10 years or more.