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Gold Loan vs Personal Loan

Compare Gold Loan and Personal Loan

Last Updated 19th May 2022

Parameters Gold Loan Personal Loan
Interest Rates 9.00% to 29.00% 10.25% to 36.00%
Type of Loan Secured Loan Unsecured Loan
Processing Time 24-48 hours 3-7 days
Maximum Loan Amount Upto 90% of the value of gold Upto ₹ 75 Lakh
Loan Tenure 1 day to 36 Months 3 Month to 72 Months
Apply for Gold Loan @ 9.00%* Get upto ₹ 500* Voucher

Gold Loan vs Personal Loan

When you need money at a shorter time, both the gold loans and the personal loans come in 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 according to your financial needs. Both the financial products are preferred, but they have different interest rates and charges. Gold loans vs personal loans interest rates are different for their secured and unsecured nature. A personal loan is an unsecured loan, whereas a gold loan is a secured loan. Now, how to choose which type of 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.

Difference between Gold Loan and Personal Loan

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

  • Processing Time: A gold loan is a secured loan and the disbursal time is very quick in this type of 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 making 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, you can consider the gold loan; otherwise, a personal loan is the right choice for high-value needs.
  • Interest Rate: Gold loan vs personal loan interest rates are different. 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, you should consider a gold loan as banks do not check credit score in case of a gold loan and charge a higher rate of interest on a personal loan for a 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. Remember that longer tenure will increase the cost of the loan in the form of an interest burden. Therefore, if you are confident of repaying the loan in a shorter tenor, you should take a gold loan. If not, then a personal loan is for you, especially if the amount is higher and tenure.
  • Eligibility: Any person above 18 years can apply for a 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. In addition, 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 and principal amount). However, in some gold loan schemes, lenders allow the borrowers to pay the interest every month, and the 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 the short term, he can opt for the gold loan non-EMI option.
  • Processing Fee: Determining the processing fee helps you decide which loan to take. Gold loans come with minimal processing charges as low as Nil and some lenders charge 0.10%-1% of the loan amount. In personal loans, the processing fees go up to 2.50% of loan amount. Compare the processing fee carefully before making any decision.

The choice to select one out of the two credit options 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. Also, 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.


Which is a better-personal loan or gold loan?

A gold or personal loan are both easy financing options if you need finance to fulfil shorter needs and both have their advantages & disadvantages. For instance, a gold loan can be a better choice if you can repay the loan in a shorter duration and 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 a faster processing time with no requirements for submitting Income Proof or CIBIL Score. However, in such a loan, gold jewellery valuation can take time.

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, a gold loan starts at 9.00%, and the interest rate on a personal loan is 10.25%.

Which loan charges a lower processing fee?

Gold loans come with minimal processing charges as low as Nil, and some lenders charge 0.10%-1% of the loan amount. However, in personal loans, the processing fees go up to 2.50% of the loan amount.

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Gold Loan News - May 2022
  • 2022-05-13 : PNB Revises Gold Loan Rates
    Punjab National Bank has increased the rates on gold loans, and as a result, the bank offers the lowest rates starting at 7.55%. Earlier, the rate was 7.25%.
  • 2022-05-13 : South Indian Bank Posts all-time High Net Profit in Q4
    The Bank has posted an all-time high net profit of ₹272 crores for Q4 in FY 22 against ₹6.79 crores during the corresponding period of the previous year.
  • 2022-05-13 : Ujjivan Small Finance Bank Profit Falls by 7% for Q4
    The bank has reported a 7 percent fall in its net profit to Rs 126.5 crore. Earlier, the bank had posted a net profit of Rs 136 crore in the same quarter of the preceding fiscal year 2020-21.
  • 2022-05-10 : Federal Bank Changes Interest Rates on Gold Loans
    Federal Bank has increased the gold loan interest rates, and thus you can now avail of loans starting at 7.39%
  • 2022-05-10 : Canara Bank Hikes Gold Loan Interest Rates
    The bank has increased the lowest gold loan rates by 40 basis points from 7.25% to 7.65%.
*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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