Home loans and gold loans have different purposes and repayment terms. While both are secured loans with collateral, a home loan has a longer tenure. However, home loan interest rates are usually cheaper than a gold loan.
Does that mean a home loan is cheaper than a gold loan? Let’s weigh your options:
Home loans and gold loans are both secured loans. It means you need collateral or security for it, unlike personal loans. However, this makes both home and gold loans cheaper than personal loans.
Here’s an overview of the key differences between a home loan and a gold loan:
Interest Rates and Tenure
Since the repayment term is longer for home loans, the interest rates are cheaper than gold loans. However, a gold loan needs faster repayment, for instance, within a year or two. Additionally, gold loans have a fixed rate of interest. Home loan interest rates may be fixed or floating. It makes the home loan a cheaper option for many.
As the tenure is shorter for gold loans, the EMIs are high. It makes repayment more difficult. A home loan is thus convenient if you cannot repay your gold loan debts within the stipulated time. The longer tenure makes the EMIs more affordable.
One of the advantages of a home loan in India is the tax deduction. It allows you to claim tax benefits of up to INR 1.5 lakhs under Section 80 EEA. On the other hand, unless you use the proceedings of a gold loan for home renovation or construction, you cannot claim a tax deduction.
Home loans require more documentation and the eligibility criteria are more stringent than gold loans. While the eligibility criteria vary with lenders, most request income proof, age, property value, income, and credit history. A gold loan, on the other hand, has a shorter loan processing time.
One way to identify the right loan is to do a cost-benefit analysis. Consider your options and needs, and then select a loan. For instance, do you think repaying the entire loan amount within a short period is feasible for you? If not, then you are better off with a home loan.
Banks and NBFCs offer both loans at less than the value of the collateral. So you can expect to receive a home loan for up to 90% of the property’s value. A gold loan, however, weighs in the value of the gold. You can expect a loan approval ranging from 60 to 90 percent of the gold’s value.
Furthermore, a gold loan gives you access to a smaller loan amount since the loan processing time is faster. It is best to use a gold loan for immediate needs. However, a home loan allows you to cover more expenses and borrow more.
Since paying off a gold loan takes precedence, most people can’t afford it. Does that make a home loan cheaper than a gold loan? Yes, as a home loan becomes more accessible because of the longer tenure and low-interest rates. Do explore ApnaPaisa to get the best offers on loans.