The Difference Between Gold Loans and Property Loans

Understand the difference between gold loans and Property Loans on the basis of comparing collateral & loan amount, rate of interest, eligibility criteria and more at IIFL Finance.

29 Oct,2022 11:50 IST 75
The Difference Between Gold Loans and Property Loans

Sound financial planning can help you manage your essential and regular expenses conveniently. A recurring income, expenditure, and savings outlay can help you handle planned and unplanned financial requirements. However, sometimes, you find yourself amid a chain of monetary situations with short deadlines. Loans are ideal in such circumstances.

Under gold loans and Loans against Property (LAP), you pledge your gold assets or immovable properties as collateral with financial institutions. With the involvement of collateralised assets, these loans can help you pool hefty loan amounts quickly. Though both are secured loan products, several factors make them distinct.

Gold Loan vs Property Loan

1. Collateral For Loan Procurement

Financial institutions (FIs) require gold assets as collateral for sanctioning a loan on gold jewellery. The lender assesses the gold's worth per the prevailing market price and offers a certain percentage of the ascertained value as a loan.

In the case of a loan against property, you have to mortgage a commercial or residential property with the lender to secure a loan. In both cases, the lender retains the pledged assets with them until the disbursement of the total loan amount (principal and interest). Your lender can liquidate the pledged collateral to recoup the outstanding loan amount in case of payment defaults.

2. Interest Rate Charged On Loans

Gold loans come with fixed interest rates. Generally, lenders offer you multiple repayment schemes to choose from. The repayment period plays a role in deciding the charged interest rate. Interest rates on gold loans fluctuate between a median range of 9.24% to 26%, depending upon the financial institution.

Secured loans against property have fixed and floating interest rates. Fixed interest rates do not change with market fluctuations. However, floating interest rates are volatile and keep altering with a shift in market trends. The fixed interest rate on LAP varies according to market.

3. Eligibility Criteria

Most lenders do not perform stringent background checks before processing gold loans. You can quickly get a gold loan with an average credit score as lenders do not rely much on your credit history. They pay attention to the weight, market price, and purity of the pledged gold.

The requirements for LAP eligibility involve many complex procedures. Lenders assess your application based on factors like income, property value, existing debts, age, employment status, and credit history.

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4. Loan Processing Time

A gold loan is one of the most trusted resources for unplanned cash requirements. These loans are quick to obtain as they follow a simple processing system. Once the lender is satisfied with the pledged gold’s purity and has ascertained its market price, they process your loan application quickly.

The LAP loan's processing period is more extended than a gold loan as lenders prefer to verify the documents of the mortgaged property keenly. Therefore, the verification and registration procedure adopted in LAP are pretty time-consuming.

5. Repayment Period

Gold loan lenders allow you to choose between monthly, quarterly, or yearly EMI payments. The length of your repayment plan determines the EMI amount. A shorter repayment scheme can have a higher EMI than a longer one.

Loans against a property usually have a longer repayment tenure that exceeds 20 years. Therefore, the LAP will be a superior option for securing a hefty loan at an affordable interest rate and a feasible repayment period.


Various factors such as interest rate, repayment schedule, and sanctioning procedures help to differentiate between gold and property loans. You can opt for IIFL Finance gold loans to meet your financial emergencies. The platform offers easy gold loans with minimum documentation and flexible repayment schemes. IIFL stores pledged gold in tech-safe lockers and also provide insurance coverage on them.


Q1. Do loans against property involve processing fees?
Ans. Yes. Loans against property involve a percentage of the loan amount as processing charges. Generally, lenders charge 2% or 3% as processing fees.

Q2. What documents do I have to give for verification in the case of a gold loan?
Ans. The paperwork required for a gold loan is
• Identity proof, such as an Aadhar card or PAN card
• Residence proof, such as electricity bills
• Passport-sized photograph

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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