Borrowing Against The Blues

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Borrowing Against The Blues
Yagnesh Kansara - 01 May 2021

The financial front is on the boil – be it an individual or a corporate – thanks to the pandemic and its rerun on the economy’s wobbly recovery. The crisis has brought us to a juncture where exigency has ceased to be an accident; it is more of an incident now. Financial emergency can precipitate any day, any moment. It may be professional or medical or, maybe, both at a time.

Standing amid such overpowering uncertainty, one needs to brace for any kind of financial emergency. Often we need to borrow from banks or financial institutions or from some private sources in such trying times.

Gold, known as the safe haven, has been for eons helping us address emergencies, making gold loan the first choice. Some of us also apply for loan against property (LAP). A detailed look into the two options would help us understand their various nuances.  

When you need instant financial help, it can put you under a lot of stress, and leave you scouting for immediate funds. At times, liquidating mutual funds or fixed deposits is not a profitable solution, but assets will instantly fetch money.

As a borrower, you are eligible to get a loan against gold ornaments and coins once the lending expert evaluates the metal. You can use the money for purposes such as funding a child’s education, medical emergency, for a holiday and business expansion.

The loan against property is also a prudent method when you have a property to be mortgaged. You may borrow for your business or personal needs at attractive rates. An LAP can be used for personal needs, industrial property, upgrade of business units or business expansions.

“Both gold loan and loan against property are attractive options for you if you are facing a cash crunch. To choose the better one, you can evaluate the interest rates, processing fees and the turnaround time, so that you gain maximum benefit from the loan amount in case of an emergency,” says Tarun Birani, Founder and CEO of TBNG Capital Advisors.

If you are buying a gold loan, you may avail credit at an attractive interest rate in the range of 10-12 per cent per annum, based on the prevailing market situation. The rates can vary depending upon the product, while for properties, the rate of interest starts from 8.35 per cent per annum. The loan period for gold loans is minimum of three months and the maximum is up to 12 months, while when you are mortgaging your property, the maximum tenure is 15 years.

“While a gold loan is quick, highly liquid and has a short repayment period, loan against property is best suited when you want a large amount of money and it may require a long processing time. You can choose based on your requirements,” says Birani.

The banks offer gold loans from Rs 10,000 to Rs 1 crore. The loan amount, called the ‘loan to value’ (LTV) differs across institutions. More aggressive lenders offer a higher LTV. In case of LAP, you can get loan assistance ranging from Rs 10 lakh to Rs 5 crore.

Availing gold loan is simpler compared to the loan against property. It doesn’t matter whether you are self-employed or salaried, you can apply for a gold loan. This makes it a more convenient option for the borrower. The eligibility for LAP is done based on the financial status of the borrower and the value of the property.


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