Gold loans and LAP are the best options for financing significant personal or business needs, such as funding a child’s education or wedding, business expansion, etc., due to the presence of common features like no restriction on how the loan proceeds may be used in the end, secured nature, and the potential for large loan amounts against pledged collateral. However, there are other differences between gold loans and LAP that may favour some groups of borrowers more than others.
Here, let’s compare IIFL gold loan and LAP to help you decide which is best when you need large-ticket funding:
Processing Time
Out of most loan options, gold loans have one of the quickest disbursal times. They typically become available shortly after the loan application has been submitted, in as low as few minutes/hours. Also, examining the borrower’s credit history is given minimal to no weight in the evaluation process; instead, the value of the collateral is given priority even for finalizing the IIFL gold loan interest rate.
On the other hand, LAP disbursal typically takes two to three weeks, even though lenders must verify all of your property-related documents before making the loan payment and perform a technical analysis to verify your ownership of the property and its market value. Therefore, for those who require money right away, gold loans would be a quicker option than LAP.
Repayment Period
With the majority of lenders offering terms of one to three years and a small number of lenders offering terms of up to four years, gold loans typically have shorter repayment terms. Lenders typically offer repayment terms of up to 15 years for LAP, with a small minority offering longer terms of up to 20 years. LAP can be a good loan option for borrowers seeking lower EMIs through longer loan repayment terms because they have significantly longer repayment terms than gold loans. Given that longer repayment terms also result in higher interest costs, a gold loan at low and attractive IIFL gold loan interest rate would be the more cost-effective option for borrowers who are certain they can repay their loan in a shorter amount of time.
Expense Amount
The loan amount for gold loans is heavily influenced by the value of the gold pledged as collateral and the loan-to-value (LTV) ratio established by the lender. How much of the offered loan is in relation to the value of the collateral is determined by the LTV ratio. Depending on the lender and the repayment option chosen, the LTV ratio of gold loans can vary significantly, subject to the regulatory cap of 75% on IIFL gold loan LTV ratios imposed by the RBI. The size of the loans between the lenders ranges from one thousand to 1.5 crore rupees. Lenders typically contribute between 50% and 70% of the home’s market value under LAP, depending on the applicant’s ability to repay the loan, their income, the property being mortgaged, and other factors. After accounting for all of the various aforementioned factors, the loan amount may range from Rs 2 lakh to Rs 10 crore. Remember that a number of factors, such as the property’s age and location as well as the neighborhood infrastructure, are taken into consideration by lenders when determining a property’s market value.
Rate of interest
Depending on the loan tenure, loan amount, and repayment option selected, as well as the lender’s evaluation of the borrower’s risk, IIFL gold loan interest rates typically range from 7.00% to 29% pa. For larger loan amounts and longer repayment terms, some lenders typically charge higher IIFL gold loan interest rate. The interest rates for LAP, however, can vary from 8.20% to 13.85% p.a. depending on the lender, how they evaluate the risk associated with your credit profile, and the type of property that is pledged. Compared to the rates charged for commercial properties or properties that are not self-occupied, some lenders typically offer lower interest rates for self-occupied residential property. The loan amount and term that the borrower chooses may also affect the interest rate.
Plans for flexible repayment
For gold loans, lenders provide a wider range of repayment options. Many lenders permit borrowers to repay only their interest each month, leaving the principal component to be paid back on the maturity date, in addition to the standard EMI mode of repayment. Some also permit the up-front payment of the interest component at the time the loan is sanctioned as well as the repayment of the principal at the end of the loan term. Some gold loan options allow you to decide to repay the principal and interest at the conclusion of the loan term. Even though lenders typically only permit LAP to be repaid in the form of EMIs, some lenders also frequently offer LAP in the form of an overdraft facility. Due to the wide variety of non-EMI based repayment options available, gold loans may be a better option for those who are dealing with short-term cash flow irregularities and repayment challenges.
Process charges
For loans backed by real estate, the majority of lenders charge processing fees of up to 1%–2% of the loan amount. While processing fees for gold loans typically range from 0.5% to 2% of the loan amount, some lenders charge flat fees as low as Rs 10. Because even a small difference in these fees can have a sizable impact on the total cost of the loan, loan applicants should make sure to take them into account when calculating the actual cost of obtaining these large loans.
Select LAP if you want to get a large loan with repayment spread out over a longer repayment term for smaller EMIs and are willing to wait for the disbursal, which will occur in about 2-3 weeks. However, people who require quick access to large sums of money and have the resources to make payments in a short period of time should consider gold loans. But before selecting any loan option and lender, be sure to also take important factors into account, such as the interest rate for LAP and IIFL gold loan interest rate, processing costs, LTV ratio, and loan amount.