Gold Loan vs Home Loan: Which is Better for Your Financial Needs?
A gold loan and a home loan are secured loans, and if you are planning to buy a home, both loans can help you fulfill the purpose. The primary difference is that gold loans require you to pledge gold jewellery as collateral, whereas home loans require you to pledge the property you buy with the amount as collateral. Here are some added differences between a gold loan and a home loan.
What Is A Home Loan?
Home loans are secured loans used to purchase or construct homes. A home loan has the following advantages:• It is possible to get funds for up to 90% of the property's value. You can obtain a home loan of up to Rs 100 crores.
• You can take out a home loan with a repayment tenure of up to 30 years.
What Is A Gold Loan?
A gold loan is a secured loan taken from a lender by pledging gold articles as collateral. A gold loan offers the following benefits:• You can apply for a gold loan with minimal documents without proving your income.
• A gold loan does not require a credit score.
• Gold loans can be used for personal or business purposes, not specifically to buy a home.
Gold Loan vs Home Loan - Key Differences
Here’s a quick comparison between home loans and gold loans across key parameters to help you choose the right option based on your financial needs.
| Feature | Home Loan | Gold Loan |
| Purpose |
Purchase, construction, or renovation of home |
Short-term financial needs |
| Collateral |
Property |
Gold jewellery |
| Processing Time |
Longer (due to extensive verification) |
Faster (usually within a few days) |
| Loan Tenure |
Up to 30 years |
Up to 24 months |
| Interest Rate |
Lower (due to longer tenure and higher amount) |
Higher (shorter tenure, smaller loan amount) |
| Processing Fee |
Nil to 0.5% |
Nil to Up to 0.1% |
| Repayment Options |
Primarily EMIs |
Flexible repayment options |
| Eligibility Criteria |
Stringent (income proof, CIBIL, documentation) |
Lenient (no income proof or CIBIL required) |
Gold Loan vs Home Loan: Quick Comparison
Gold loans are short-term loans backed by gold while home loans are long-term commitments secured against real estate.
Gold Loan or Home Loan: Which Is Better
Home loans give you access to funds of up to 90% of the property's value, which you can use to purchase or construct a house with a repayment tenure of up to 30 years. On the other hand, gold loans do not have end-use restrictions or require income proof or CIBIL scores. You must choose between the two based on your needs.Apply For A Loan With IIFL Finance
A gold loan can be used to meet various financial needs, whereas a home loan can fulfill your real estate needs. However, obtaining either loan requires choosing a reliable source. An IIFL Finance gold and home loan alleviate the stress of financial hardships. Get a loan in a few minutes by downloading the IIFL app and completing your KYC.
Frequently Asked Questions
Ans. In addition to flexible repayment options and minimal documentation, gold loans offer attractive interest rates, no income-proof requirement, and no need for CIBIL.
Ans. You can get a home loan with a bad credit score from banks and NBFCs, but the mortgage rates are higher. To improve your home loan eligibility, consider including a co-applicant.
Yes, you can take a gold loan as well as a home loan provided you meet all the eligibility criteria set forth by each lender. They will assess your financial standing, income, credit score, and repayment capacity before approving multiple loans.
Not really, they are more suited for short-term financing with repayment tenures that usually range between 12 and 24 months. They are not suitable for long-term financing due to their shorter repayment timelines and higher interest rates compared to home loans.
Individuals needing quick funds for short-term requirements, such as emergencies or business needs, and who possess gold assets, may find gold loans suitable. They offer faster processing and require minimal documentation. In contrast, home loans are better suited for long-term investments like purchasing or constructing property.
Yes, many lenders allow prepayment of gold loans without penalties. For home loans, prepayment penalties are generally waived for floating-rate loans. However, fixed-rate home loans may incur charges, typically around 2% of the prepaid amount.
Yes, you can take both a gold loan and a home loan simultaneously, provided you meet the eligibility criteria for each and have the required collateral. Since both loans are secured against different assets—gold and property—they don’t conflict with each other.
No, gold loans are typically designed for short-term financial needs and are offered for tenures ranging from a few months to 3 years. For long-term goals like home purchase or construction, a home loan is more appropriate due to its longer tenure and structured EMIs.
A gold loan is ideal for individuals who need quick funds for short-term expenses like medical emergencies, business needs, or education and have gold to pledge. It suits those who may not have the documents or credit score required for a home loan.
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