What's the Difference Between a Gold Loan and a Loan Against Property?

05 May 2022

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Loans are one of the best ways to access funds in an emergency or to pursue your goals. There are broadly two types of loans that you can procure - a secured loan and an unsecured loan. If you offer collateral to the lender in exchange for the loan, you are said to have taken a secured loan. Many people prefer to take a secured loan as it helps them receive funds on suitable loan terms and conditions such as lower interest rates and higher loan amounts. When offering a secured loan, lenders usually accept gold, securities, property, and other similar assets as collateral. Out of all these types, a loan against gold and a loan against property are the two most common types of secured loans.

Now, both gold and property are extremely valuable and stable assets to place as collateral. However, is one asset better than the other? Here, we will do a gold loan comparison against loans taken on property to help you evaluate the differences between the two.

First, let’s understand each loan type.

Gold loan definition

A gold loan is a loan that is taken by offering gold as collateral to the lender. The value of the gold pledged as collateral is usually always higher than the loan amount. This means that most lenders can offer you a gold mortgage loan equal to and above 75% % of the pledged yellow metal's market value. Gold loans are generally expensive to get as the gold market is quite volatile and increases the risk exposure faced by the lender. Furthermore, loan providers usually only accept gold items that have purity from 18 karats to 24 karats.

You do not need to worry about the security of your gold as the gold collected as collateral is kept in a secured vault by the lender. Once you repay the gold in its entirety, you can collect your pledged gold from the lender.

What is a loan against property?

When you offer your property as collateral to procure a loan, you are said to have taken a loan against property. Like gold loans, the market value of the property is usually higher than the loan amount. This is because the lenders typically only offer 40% to 75% of your property value as the loan amount. Loans taken against property are relatively cheaper as the real estate market is much more stable than the gold market; as a result, the risk borne by the lender is comparatively less.

Before your loan against property gets sanctioned, you must submit all the legal documents of your property to the lender. As a result, you cannot sell the property or make any legal changes to it until you repay the debt taken.

Gold loan vs home loan (mortgage against property): What are the differences?

While many prefer to procure a loan against property due to the lower interest rates, gold loans are more accessible for others. Hence, it is safe to say that the right type of collateral depends on your financial stability, creditworthiness, and reason for procuring the loan. Let’s take a closer look at the main differences between a gold loan and a loan against property.


Gold Loan

Loan Against Property (LAP)

Accepted Collateral

Pieces of jewellery, , coins, etc.

Real estate properties such as land, flats, bungalows, etc.

Rate of interest levied by the lender

Usually between 9% and 28%.

When you compare gold loan interest rate, you will find that it is generally higher than LAPs due to the increased volatility of the gold market.

Lenders typically charge an interest rate that is anywhere between 9% and 12%. Comparatively cheaper to procure as the real estate market is quite stable.


If you have the quality and quantity of gold that is eligible to be accepted as collateral, you can easily procure a loan by pledging the yellow metal. Gold loan providers do not even ask for proof of income.

Loans against properties have a few more conditions to meet before getting sanctioned by the lender. LAPs usually require the borrower to be creditworthy and in a capacity to repay the debt comfortably. Furthermore, the property you pledge must be wholly owned by you. It should also be free from any legal conflict.

Loan turnaround time

Quicker loan processing and sanctioning time. Gold loans are one of the fastest lines of credit that are available in the market today.

LAPs take a little more time to get sanctioned as the lender runs thorough background checks on the property you pledge.

Repayment tenure

Gold loans are generally procured for a short to medium period of time.

Property loans are usually long-term forms of debt.

Loan Amount

Gold loans are best suited for lower loan amounts that run into a few lakhs of rupees (depending on the value of the gold given). These loans are generally used to fund immediate hospitalisation charges, or to consolidate existing debts.

Loan taken against property are usually of higher amounts. These loans are meant to help you to meet the bigger requirements in your life such as funding critical illness treatments or gathering the capital to start your own business.


Gold loans have a very simple loan application process. You do not need go through a tedious documentation process to procure a loan against gold.

As there are a few more legalities involved with LAPs, these loans may require you to go through a relatively longer documentation process. However, if you want, you can provide the required documents to the lender and have them do the process for you.


As we can see, the choice between a gold mortgage loan and a loan taken against property really depends on your unique needs. This is because both these types of loans serve unique purposes and are equally useful for the borrower. While a gold loan helps you fulfil the need for money for immediate expenses, a loan against property is usually taken for long-term goals that have been carefully planned out. You need to carefully evaluate each loan type and decide which one suits your own situation.

Bank of Baroda offers gold loans and LAPs, among other types of loans. You can initiate the application for all our retail loans easily on our website. If you are taking a mortgage loan against property, you can make use of our Mortgage Loan EMI Calculator to understand and plan your payments. If you are taking a gold loan, we have a special Gold Loan Calculator too. Thus, you can plan your loans out with ease online from the comfort of your home. Moreover, all our loans have a hassle-free application process and affordable interest rates to make things easy for you. If you need any further assistance with the application process, do reach out to us on our toll free numbers - 1800 5700 or visit the nearest Bank of Baroda branch.

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