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Gold Loan v/s Personal Loan

Compare Gold Loan & Personal Loan

Last Updated 01st Mar 2021

Parameters Gold Loan Personal Loan
Interest Rates 9.50% to 24.00% 8.95% to 24.00%
Type of Loan Secured Loan Unsecured Loan
Processing Time 24-48 hours 3-7 days
Maximum Loan Amount Upto ₹ 85% of the value of gold Upto ₹ 2 Cr
Loan Tenure 1 month to 36 months 6 month to 72 months
Apply for Gold Loan @ 9.50%* Get upto ₹ 500* Cashback

Gold Loan or Personal Loan

When you need money at a shorter time, then both gold loan and the personal loan comes handy as both the financial facilities do not have any end usage restriction on loan proceeds which makes them the preferred option. However, you have to choose between the two, whichever suits your financial needs. Both the financial products are preferred, but both of them have different interest rates, charges and fees. A personal loan is a secured loan, whereas a gold loan is an unsecured loan. Now, how to choose which type of a loan, here are pointers which will help you decide, which loan you should take according to your needs.

What Is A Gold Loan?

A gold loan is a credit against gold. Under this loan, gold jewellery is taken as security by the lending bank/NBFC. The advance is given to the borrower against this gold as insurance. Also, the interest rate on the gold loan is lower than unsecured loans.

What Is A Personal Loan?

A personal loan is also called an unsecured loan or signature loan, as no collateral is required to apply for a personal loan. A personal loan is sanctioned by looking at the borrower’s credit score, and in times of distress, this loan acts as your best friend.

Gold Loan Vs Personal Loan

These parameters will help you choose which loan you should prefer:-

  • Processing Time: Gold loan is a secured loan and the disbursal time is very quick in this type of a loan. Generally, the amount is credited to the borrower’s account within 24-48 hours. However, personal loan application sanction can take 3 to 7 days, as the borrower is required to submit their payslips, bank statement and other related documents. After submission of the documents, they are verified, which increases the disbursal time. Nowadays, many banks offer online loan approval facilities, which makes the personal loan process fast and convenient.
  • Loan Amount: Generally, personal loans range between ₹ 50,000- ₹ 25 Lakh, whereas some lenders also give upto ₹ 75 Lakh. In contrast, the gold loan amount depends on the value of your gold asset, which you are pledging as collateral. However, RBI has barred lenders from sanctioning gold loans which exceed 90% of the gold value. If you have gold that fits your fund requirement, then you can consider the gold loan; otherwise, a personal loan is a right choice for high-value needs.
  • Interest Rate: The interest rate in both personal loan, as well as gold loan, varies. Gold loans are secured loans, so the interest rate on the gold loan is lower and starts at 9.90%. However, the interest rate of a personal loan ranges from 10.45% to 26% per annum. If you have a bad credit score, then you should consider a gold loan as banks do not check credit score in case of gold loan and charge a higher rate of interest on a personal loan for low credit score.
  • Loan Tenure: The loan tenure for personal loans is from 1 year to 5 years, and in gold loans, the tenure starts from 1 day to three years. Always remember that longer tenure means a higher rate of interest. If you are confident of repaying the loan in a shorter tenor, then you should take a gold loan, if not then a personal loan is for you, especially if the amount is higher as well as tenure.
  • Eligibility: Any person who is above 18 years can apply for the gold loan and there is no minimum income required as the loan amount is assessed on the gold value. However, to apply for a personal loan, a salaried employee should have a minimum income of ₹ 25,000. An applicant should have a total work experience of more than three years and a minimum of 650 credit score. Whereas, in gold loan credit score does not play a vital role.
  • Repayment Option: Personal loans have an option of repayment in the form of EMIs (including interest as well as principal amount), however, in some gold loan schemes lenders allow the borrowers to pay the interest every month, and principal amount can be paid on maturity. In other cases, the borrower can repay their interest amount upfront during the loan disbursal with the principal component to be repaid at the end of the loan tenure. If a borrower has cash flow problems for a short term, then he can opt for the gold loan non-EMI option.
  • Processing Fee: Determining processing fee helps you decide which loan to take. Gold loans come with minimal processing charges as low as ₹ 10 and some lenders charge 0.10%-2% of the loan amount. In personal loans, the processing fees go up to 3%. Compare the processing fee carefully before making any decision.

The choice to select which one out of the two will be purely based on borrowers needs and requirements but before finalising your decision make sure to compare the interest rate, processing fees, disbursal time and more. No matter which loan option you select, make sure to assess your repayment and paying EMI capabilities so that your credit score is not affected in the future.

FAQs

Which is a better Gold Loan or Personal Loan?

A gold or personal loan are both easy financing options if you need finance to fulfil shorter needs and both have its advantages & disadvantages. For instance, a gold loan can be a better choice if you can repay the loan in a shorter duration and also have a lower interest rate. On the other hand, a personal loan would be better for a longer tenure & higher loan amount. You must thus compare both loans depending on the requirement of your financial needs.

What are the benefits of a gold loan?

A gold loan has faster processing time with no requirements for submission of Income Proof or CIBIL Score.

Which has a lower Interest rate- Gold Loan or Personal Loan?

A gold loan is a secured loan and thus has a lower interest rate than a personal loan, which is an unsecured loan. As per the current rates, gold loan starts at 9.50% and the Interest rate on a personal loan is 8.95%.

Which loan charges a lower processing fee?

Gold loans come with minimal processing charges as low as ₹ 10 and some lenders charge 0.10%-2% of the loan amount. In personal loans, the processing fees go up to 3% of loan amount.


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Gold Loan News - Mar 2021
  • 2021-02-26 : IRDAI gives approval for Axis Entities-Max Life Insurance deal
    The Insurance Regulatory and Development Authority of India has given its approval to acquire up to 12% stake in Max Life Insurance by Axis Bank and its subsidiaries, Axis Capital and Axis Securities. The IRDAI approval was an important venture transaction that was first announced in April 2020
  • 2021-02-26 : IndusInd Bank to grow loan book by 15-18%
    IndusInd Bank is expecting to grow its loan portfolio by 15-18% year-on-year for the next two financial years under its fifth planning cycle.The Bank’s year-on-year growth in advances which include home, personal, LAP, two-wheeler car and gold loan along with business and mudra loan was flat at Rs 2.07 trillion until December 2020. Its deposits which include fixed and recurring deposits, grew by 10% to Rs 2.39 trillion.
  • 2021-02-26 : Canara Bank organized Mega Retail Expo in Mumbai
    Canara bank organized a mega retail expo camp at Gala Auditorium, Patuck Campus in Santacruz (East). The retailers present at the expo displayed salient features of their products which include home, personal, LAP, two-wheeler car and gold loan along with business and mudra loan. A total loan amount of Rs. 224.30 Crores were sanctioned through the expo.
  • 2021-02-25 : SBI offered customers to apply for the gold loan via call or SMS
    Customers can now apply for the gold loan from SBI by giving a missed call on 7208933143 or SMS GOLD at 7208933145, and the bank will then respond with a callback. A minimum loan amount of Rs 20,000 up to a maximum of Rs 50 lakh is sanctioned by the bank.
  • 2021-02-25 : Muthoot Finance Q3 profit up 17% to Rs 1,006 cr, revenue rises 16%
    Muthoot Finance has reported a net profit of Rs 1,006.6 crore during the quarter ended December 31, 2020, compared to Rs 861.04 crore a year ago. Muthoot Finance achieved a growth of 22 % in the gold loan portfolio during the nine months of the current year and likely to end the year with at least 25% growth as against the previous year growth of 22%
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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