Loan against Gold vs Loan against Securities
When in need of funds, individuals often consider leveraging their assets to secure loans. Two popular options are loan against gold and loan against securities. While both provide financial assistance, they have distinct features and considerations. In this article, we will delve into the differences between loan against gold and loan against securities to help you make an informed decision.
Comparison Between Loan against Securities vs Loan against Gold.
| Category | Loan against Securities | Loan against Gold |
| Application process | Many NBFC and Banks supports online applications for loan against mutual funds which is entirely digital and only takes 15 minutes to complete the application | While many banks now offer online application options, gold loan processes have traditionally been conducted offline |
| Loan Amount | ₹25000 to ₹5Crore | Up to Rs.1.5 crore |
| Rate of Interest | • Flat 10 % p.a on reducing balance | Interest rate starts from 7% p.a. to 29% p.a. |
| Processing Fee | • 1% of the loan amount plus applicable service tax | • 0% - 2% of the loan amount + GST |
| Loan Tenure | Upto 24 Months Tenure, 6, 9, 12, 24 Months Tenures | 3 months to 4 years |
| Eligibility | • Applicant must be at least 18 years of age and not more than 75 years old. • Single mutual fund unit holders can borrow a loan. • Mutual funds units in CAMS, KFintech & in DEMAT are accepted |
• 18 years and above • 18 carats or above • Applicant must be creditworthy |
| Credit Score | • No Credit Score Limit | NA |
| NRI Cutomers | • Supports NRI customer with NRE and NRO accounts | NA |
| Loan to Value (LTV) Ratio | • Equity Funds: 50% of your mutual fund unit value • Debt Funds: 70% LTV |
LTV Ratio - 70 to 80% of the value of the gold |
| Prepayment charges | No Pre-payment penalty after first EMI payment | As per the terms and conditions |
| Payment Options | • EMI Repayment: Pay a monthly instalment that is divided between interest and principal repayment. • Balloon Repayment: Pay only the loan interest every month and the principal amount at the end of the loan period. |
• Repayment in Equated Monthly Installments (EMI) • Payment of interest upfront and repayment of the principal loan amount at the end of the loan tenure. • Payment of interest on a monthly basis and repayment of the principal loan amount at the end of the loan tenure. |
| Documentation | • Fully Digital • Aadhaar number • PAN Number • Bank IFSC code • Bank Account number • Mobile number associated with your Aadhaar & Bank account |
• Duly-filled application form • Passport sized photographs • Identity proof • Address Proof • Signature Proof • Form 60 or PAN card • Proof of age |
| Turnaround time | 15 Minutes | 1 day |
| Loan on all days | • Loan on all days, including saturday and sunday | • Monday to Friday. |
| Pros | • Faster Processing of the loan • Comparatively lower interest rates • Lower Processing Fee • No prepayment charges after 6 months • Mutual Fund Loans can be availed as overdraft • Pay interest only on the used amount |
• Competitive interest rates • Lower Processing Fee • Multiple repayment options |
| Cons | • Minimum loan amount is higher | • The maximum loan amount for gold loans is capped at ₹1.5 crore • No digital process |
