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Home Business Gold Loan V/s Personal Loan – Which is Better

Gold Loan V/s Personal Loan – Which is Better


A person may want financial aid from time to time, and they may require money on an urgent basis. There might be a variety of causes for this. They may require finances to satisfy the demands of a newly founded business, return borrowed money, pay school or college expenses, repair the property, accomplish travel plans, and cover medical emergency bills, among other things.


When it comes to possibilities for individuals to overcome financial difficulties, especially those caused by crises or loss of income, gold loans and personal loans are quite popular. However, in order to determine which alternative may best meet the demands, it is necessary to learn about them thoroughly.

What is Personal Loan and Gold Loan

  • Gold loan

When a gold loan is referred to by its alternative name, a “loan against gold,” you have a clearer picture of what it is. Essentially, the applicant puts up their gold assets and therefore is awarded a proportion of the value of those assets as the loan amount, resulting in what is known as a secured loan. The borrower then pays monthly installments until the loan is paid off, at which time the lender refunds the gold received.

  • Personal Loan

A personal loan operates similarly to a gold loan, except that it is an unsecured loan, which means it does not require collateral. Without something to guarantee repayments, the loan amount will normally be substantially lower, and the loan applicant will have a more difficult time obtaining loan approval.

The loan agent will analyze the applicant’s credit background throughout the application process for both loans, although it is often not as important in granting gold loans.

We’ve included a thorough analysis of personal loans and gold loans below so you can come to a conclusion about which is preferable in an emergency.

Gold loan v/s Personal loan

  • Time required for processing

Personal loan applicants must submit their payslips/ITR forms, as well as many other papers, for their loan application to be approved. Because these papers must be verified, personal loans are typically dispersed within 2-7 days following the loan application. However, other lenders offer to issue personal loans in a shorter period of time.

  • Gold Loan Vs Personal Loan Interest Rates

Lenders demand greater interest rates based on the loan’s payback. Gold loans, for example, have higher payments than personal loans or even other personal debt, therefore their interest percentage shoots up.

A gold loan’s interest rate might range from 7.5 percent to 29 percent on average. Personal loans, on the other hand, have interest rates ranging from 10% to 25%. However, risk evaluation plays a significant role in determining a loan’s interest rate. Because gold loans are secured loans, the interest rate is lower; the borrower is going to put up security to lessen the risk of nonpayment. Personal loans, on the other hand, would eventually have a higher rate of interest due to their unsecured nature.

  • Term of Loan

The loan term is the period of time the lender provides the borrower to repay the loan. Personal loans typically have payback durations ranging from 1 to 5 years, whereas gold loans have repayment terms ranging from three years to as low as eight days, different loan amounts.

While longer loan terms provide you more time to pay off your debt, they also enable time for interest to accumulate, increasing the amount you must pay. The shorter loan term offered by gold loans might be stressful, especially if you obtain a loan with a high interest rate. However, for borrowers who are convinced that they will be capable of paying off their loan in a short amount of time, the short term is ideal.

  • Fee for processing

Personal loan processing fees might range from 3% to 5% of the loan balance. Some lenders impose a fixed processing fee of Rs 10 for gold loans, while others charge 0.10 percent to 2 percent of the loan amount. So, while deciding between loan choices, examine the processing fees. Taking into account the processing fees will allow you to calculate the true cost of obtaining a loan.

  • A poor credit history

Because personal loans are not secured, lenders take a conservative approach. They primarily grant personal loan requests after considering an applicant’s credit score, monthly income, work profile, employer profile, and other factors. Some lenders have even begun to determine interest rates for personal loan applications depending on their credit rating.

Gold loans, but on the other side, are completely secured loans with sufficient collateral. This enables lenders to sell the pledged gold in the event of a borrower default. As a result, lenders are more likely to take a lenient lending strategy when providing gold loans to persons with weak credit ratings and credit profiles.

It will be difficult to obtain a personal loan if you have a bad credit score, as evidenced by your low CIBIL Score. It is, nevertheless, not impossible. Despite your low credit score, most lenders will be willing to provide you a loan, but at a somewhat higher interest rate. 


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