Which is Better Between Gold Loan and Personal Loan?

gold loan vs personal loan

There is no shame in looking into loan possibilities. However, there are several borrowing choices available, and you may be having difficulty picking between them. Borrowers frequently choose gold loans and personal loans for unexpected cash infusions. For gold and personal loans, bad credit ratings are checked. However, creditworthiness is less of consideration here than it is with more high-profile loans. Gold loan vs Personal Loan is quite an area open for discussion.

Therefore, below is a detailed comparison of gold and personal loans that would help you make an informed decision. However, before comparing, understand what gold and personal loans are.

Gold Loan

Gold loan refers to credit against gold. When you take a gold loan, you provide your jewellery or ornaments to the lending bank/NBFC. The borrower is then given money against his/her assets that the lender keeps as security. Furthermore, gold loans, unlike unsecured loans, offer lower interest rates.

Personal Loan

A personal loan (such as a business loan) functions similarly to a gold loan. The only difference is that personal loans are unsecured loans. This means it does not have the advantage of security. Without something to guarantee the repayment, the loan amount will normally be substantially lower and the applicant will have a more difficult time obtaining loan approval.

There is no difference between gold loan and business loan, except some of its principles factors are a little unique. The loan agency will analyse the applicant’s credit background throughout the application process for both loans, although it is often not as important in granting gold loans.

Gold Loan vs. Personal Loan

Among a gold loan vs personal loan, you will find out which is most suited for individuals, based on certain conditions.

Interest rate

Gold loan interest rates vary from one lender to another. In some cases, gold loans can be up to 24% p.a. However, one can avail of personal loans at attractive interest rates like 11.99%. Also, for personal loans, the rate offered to a borrower depends on the individual’s creditworthiness and eligibility.  So considering factors like repayment and security, individuals can get more details on the lowest interest rates for gold and personal loans.


The tenure for gold loans can range from 3 months to 3 years. On the other hand, personal loan tenure ranges from 1 to 5 years. For those who seek a longer tenure, a personal loan can be a better choice since. This way, individuals can plan their monthly instalments effectively. Also, this allows borrowers to maintain a decent credit score. When the loan permits flexible tenures, borrowers can choose a suitable tenure and manage expenses strategically.


The documents required for gold loans include address proof,  identity proof, evidence of possession of the pledged assets, and other documents. The lender will decide what documents you are supposed to provide to obtain a gold loan. For personal loans, the documents required include identity proof, PAN Card, address proof, bank statements, and income proof. Depending on the income and employment details that the borrower submits, the lender determines the loan amount. Personal loans do not require elaborate paperwork.

Processing speed

While this is a time-consuming process in and of itself, gold loans manage cash disbursement more efficiently than personal loans. Personal loans have a more thorough approval procedure. Thus, it normally takes 2 – 7 days for money disbursement. Few lenders (with the exception of illegally prohibited lenders) would issue a loan if the borrower’s credit history is bad. Unlike a personal loan, when you apply for a gold loan, the lender will evaluate the genuineness of your pledged gold and determine your loan amount eligibility based on that, with no regard for your credit score. So, if you’re in serious financial difficulties, have gold hanging about, and have a bad credit history, a gold loan is your best choice for securing a higher loan amount in the quickest period of time.

Processing fee

Generally, personal loan lenders charge processing fees, service charges, and insurance fees. In contrast, you’ll have to pay the standard processing fee as well as extra expenses such as gold valuation fees (paid depending on current gold value), administrative charges, documentation fees, and more with gold loans. By factoring in those extra charges, you will be able to more properly evaluate the real cost of applying for a gold loan or personal loan and select the one that is best for your financial circumstances.

Both gold and personal loans offer benefits as well as drawbacks. Hence, if you don’t mind a minor delay in loan disbursement and want an extended payback period with a higher interest rate, get a personal loan. Or, apply for a gold loan if you have gold assets to put up as collateral and need a loan that day, even if the payback time is short.  The nicest thing about these loans, however, is that bad credit history does not constitute an overwhelming strike against the borrower’s account.

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