Gold Loan vs Personal Loan - Which Loan You Should Choose to Apply

When you need money quickly, you have choices. Two popular options are gold loans and personal loans. But which one is right for you? A gold loan uses your gold as collateral (security). A personal loan doesn't require any collateral. Both have their advantages and disadvantages. In this guide, we'll compare them side by side so you can make the right decision based on your situation.

✓ Need funds quickly? Compare gold and personal loans → Choose the best option for you

You can check if you have a pre-approved loan offer with just your phone number and OTP – no need to visit the branch.

A gold loan is a secured loan. "Secured" means you use something valuable (gold, in this case) as collateral to guarantee the loan. Here's how it works:

The basic process:

You bring your gold jewellery or ornaments to a lender. They evaluate the gold's purity and weight. Based on the value, they lend you up to a percentage of that value in cash. You get the money immediately. If you repay the loan on time, you get your gold back. If you don't repay, the lender keeps your gold and sells it to recover their money.

Pros (advantages):

• High loan-to-value ratio: Since your gold secures the loan, lenders will typically give you up to 75% of the gold's value in cash.
• Quick approval and disbursement: The entire process is fast. You can often get money within hours.
• Credit score doesn't matter: Since it's a secured loan, your credit history or CIBIL score is not critical. Even with a low credit score, you can get approved.

• Flexible repayment: Many lenders offer flexible repayment options so you can pay according to your convenience.

  
  

Cons (disadvantages):

• Risk of losing your gold: If you can't repay the loan, the lender will sell your gold. You permanently lose your jewellery.
• Lower loan amounts: You can only borrow up to 75% of your gold's value, so if you have little gold, you get less money.
• Higher interest rates: Gold loans often have higher interest rates (typically 8-12% per annum) compared to personal loans for borrowers with good credit.

A personal loan is an unsecured loan. "Unsecured" means you don't need to pledge any asset – no gold, no property, nothing. You simply borrow money based on your creditworthiness (how trustworthy you are with borrowed money). Here's what happens:

The basic process:

You apply for a loan specifying the amount you need. The lender checks your credit score, income, employment, and repayment history. Based on this evaluation, they decide whether to approve you. If approved, the money is deposited into your bank account, usually within 24 hours*. You repay through fixed monthly instalments (EMIs) over a set period.

Pros (advantages):

• No collateral required: You don't pledge any asset. Your gold, property, and other valuables remain completely yours.
• Simple eligibility: Just fulfil simple personal loan eligibility and documents to get funds. Make sure you have a good credit score of 650 or higher to get the loan with ease.
• Minimal documentation: Submit minimal documentation, and once the verification is done, the amount is disbursed to your account within 24 hours* of approval.
• Fast disbursement: Once approved, funds are transferred to your account within 24 hours*.

• Flexible tenure: Choose your repayment period from 12 months to 96 months based on your affordability.

  
  

Cons (disadvantages):

• Credit score matters: A high credit score (650+) is important. A low score makes approval harder or means higher interest rates.
• Lower loan amounts (for some borrowers): The loan amount depends on your income and creditworthiness. If you earn less, you get a smaller loan.
• Verification takes time: The lender verifies your income and employment, which takes longer than a gold loan.
• Credit score impact on default: If you fail to repay, your credit score drops significantly, affecting future borrowing.

When it comes to financial needs, choosing the right loan option is crucial. Gold loans and personal loans are popular choices, each with its unique benefits. Here's a quick comparison to help you decide:

Choose a gold loan if:

• You have gold jewellery you don't use regularly
• You need money immediately (within hours)
• Your credit score is low (below 685)
• You want the lowest possible interest rate

• You're confident you can repay quickly and don't want to risk your credit score

  
  

Choose a personal loan if:

• You want to keep your gold and other assets safe
• You have a good credit score (685 or higher)
• You can wait 24-48 hours for approval and disbursement
• You need flexibility in repayment (choosing your tenure and EMI)
• You want the loan for multiple purposes (education, medical, home renovation, debt consolidation, business)
• You want to build or maintain a strong credit score

• Gold loans are for urgency: If you need money within hours and have gold you don't mind risking, a gold loan is faster.
• Personal loans are for flexibility: If you want to keep your assets and have options, a personal loan is better.
• Credit score matters for personal loans: A good CIBIL score (650+) gets you a personal loan quickly with lower interest rates.
• Plan your repayment: Choose whichever loan you can comfortably repay. Both options have consequences if you default.
• Compare interest costs: Sometimes a personal loan's lower interest rate can mean you pay less total interest than a gold loan, even if the monthly EMI is higher.