Gold Loan Vs Personal Loan

Choosing Gold Loan Vs Personal Loan

People in India have an emotional attachment to gold, especially women. At times, this attachment surpasses the need of gaining from changes in the cost of gold.

Gold is considered a profitable investment by most as it provides a feeling of security since it can be used in times of financial trouble when other means prove to be futile. There has been a plunge in the price of gold, and there is a growing interest among the investors to purchase this valuable asset. Gold is currently trading at around Rs. 25,500. There are also some people who are waiting for gold prices to fall even further. However, there are some experts according to who, the spiraling gold prices will finally settle down. The gold market is going through a transitional phase, and this is a good opportunity to invest in the gold loan.

As said earlier, women have an attachment with gold which is of an emotional nature. As a result, the gold that has been invested into goes waste. Most of the experts believe that it is better to avail of a loan on this gold which is laying waste as compared to a personal loan in times of financial difficulty.

First of all, before comparing these two loan options Gold Loan Vs Personal Loan, it is important to understand what these loans entail. Both of these loans are completely two different products and have different features.

  1. Personal Loan – A personal finance is an unsecured debt, that is, it is a loan in which the banks do not require a person to provide a guarantor or security to them.
  2. Gold Loan – A gold loan is a secured loan, in which the borrower provides their gold loan ornaments and jewelry as security to the bank.

Gold loan Vs Personal loanA large majority of the lenders are not comfortable lending finance to people without security as compared to a person asking for a loan that is provided against security. The financing institutions believe that the better the quality of the security provided, the faster is the rate of disbursement of the loan. That is the reason why a loan against one’s gold ornaments or jewelry is considered a viable option. The lender is aware of the fact that in case, the borrower defaults ad does not pay back the loan; they can sell the gold that has been deposited with them. The bank in this way can get the amount back that has been lent by them. The Personal loan EMI calculator helps an individual examine the monthly instalments and the entire finance repaid to the bank.

Gold Loan Vs Personal Loan

Parameters Gold Loan Personal Loan
Interest Rates 11.00% to 15.00% 16.00% To 22.00%
Collateral / Security Gold Ornaments or gold jewelry provided as collateral No collateral needed to be provided
Loan Tenure 1 year 1 to 3 years
Mode of Repayment of Loan A borrower has the option to repay the loan in two ways:


  • The person can pay only the interest amount during the duration of the loan and the remaining principal amount after the duration is completed.
  • A person can pay the principal plus interest every month.
The borrower has to pay the loan amount in installments. This means that the borrower will have to pay the principal amount plus interest as installments every month.
Pre-payment Charges 0 to 1% of the loan amount charged 2 to 3%  of the loan amount charged
Documentation Needed Identity Proof, Address Proof. Income Proof, Identity Proof, Address Proof. Extensive proofs regarding income and repayment capacity need to be provided.
Loan Application Processing Time 5 to 30 minutes 48 to 72 hours
Credit History Lenders provide loans to poor credit history holders a well Applications of poor credit history people are rejected
Loan Amount A person can avail a loan amount of about 85% of the gold value A person can avail a personal loan between Rs. 10,000 to 1 Crore.

Comparing the above features of both Gold Loan Vs Personal Loan. It is safe to say that gold loans are a better option as compared to personal loans. A person can avail of a gold loan for various reasons just like a personal loan. Some of the reasons for availing a personal loan or a loan against gold are:

  1. To pay for medical emergencies.
  2. For paying off credit card outstanding amounts.
  3. For the marriage expenses of a child.
  4. For paying for education expenses.
  5. One can also take an overdraft facility against its gold ornaments to meet the working capital needs of business people.

A gold loan can help a person to strengthen their financial condition and also make efficient utilization of their gold.

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