Difference between Gold Loan and Home Loan

The difference between a Gold Loan and a Home Loan starts with the type of collateral pledging and the accompanying interest rates. Both of them have their pros and cons.

So, before you decide on either one of the financing avenues to help you achieve your financial goal, you must know about all the intricacies of each. Let us discuss these two types of loans and dive deeper into understanding Home Loans vs Gold Loans.

Home Loan

A Home Loan is a type of mortgage loan where a bank or other financial institutions fund you and your family to buy the house of your dreams. Typically, a home loan covers some per cent of the total expense (or the home value). Along with the interest rate, the borrower repays the amount in Equated Monthly Instalments (EMIs), which is calculated based on the tenure, loan amount and interest rate.

You can easily calculate this EMI using our Home Loan Calculator and apply for the Home Loan online without any hassle.

Gold Loan

A Gold Loan gives a loan amount in exchange for the gold, kept as collateral. If you are in need of immediate cash and have considerable gold assets that can be utilised for the same, then this is the best option for you. To avail of this loan amount at attractive interest rates, you have to pledge gold coins issued by banks or gold in the form of jewellery.

Gold Loan vs Home Loan: Differences Explained

Parameter	Gold Loan	Home Loan
Collateral	Gold Loan has gold jewellery or coins as collateral	Home Loan has the property as the collateral
Tenure	The maximum tenure is 3 years	The maximum tenure for a Home Loan with Axis Bank is 30 years
Purpose of loan	Gives quicker disbursement of money for those who are in immediate need of money for multiple purposes	Offers amounts at a low interest rate and gives longer tenure for repayment
Eligibility Criteria	Depends on your age, ownership of the gold, credit history, etc.	Depends on factors such as monthly income, repayment history, credit score, etc.
Interest Rate	Interest rate is fixed. At Axis Bank, the interest rate is 17% and you can get a loan for amounts ranging from ₹25,001 to ₹40,00,000.	Depends on many factors like tenure, amount, credit score, etc.
Repayment Options	Repayment options include: (i) Paying the interest upfront and principal amount at maturity, (ii) Paying monthly interest and principal amount at maturity (iii) Through EMI option	For Home Loans, the repayment option is through EMIs

Choosing between a Gold Loan and a Home Loan

Choosing the best solution between the two depends on your financial requirements and repayment capacities. If you require financial aid immediately, you can go with a Gold Loan. Whereas, if you plan to buy a home and want a systematic repayment structure with a longer tenure, you can opt for a Home Loan.

Also Read: Understanding maximum and minimum tenure for a Home Loan

Frequently Asked Questions

Will Gold Loan help me improve my CIBIL score?
Yes, it will help improve your CIBIL score if you repay it regularly on time.

Can I get a Home Loan with a bad CIBIL?
Yes, you can get it with a bad CIBIL score, but it will affect your interest rates and/or the loan amount.

What are the disadvantages of a Gold Loan?
A few disadvantages include the risk of losing your assets, securing limited loan amounts (loan-to-value ratio), high interest rates, limited loan tenure, and fluctuating gold prices.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.