Gold Loan Vs Personal Loan
22 Jun 2022

Gold Loan Vs Personal Loan

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Gold Loan or Personal Loan – Which is better?

Key Takeaways

  • Gold Loans are secured loans wherein you can pledge gold as collateral to obtain funds.
  • Personal Loans are unsecured, collateral-free loans.
  • Lenders approve Personal Loans based on your credit score and monthly income.
  • Per RBI guidelines, you get up to 75% of the current market value of gold as the loan amount.
  • Gold Loans and Personal Loans have no-end use restrictions.

When you need funds urgently, you typically think of applying for loans. You can apply for unsecured, collateral-free loans or pledge your assets and obtain a secured loan. Most people generally consider Personal Loans and Gold Loans as the best options to get funds instantly. But what is the better choice? This article on the differences between a Gold Loan and a Personal Loan may help you decide.

Personal Loan Vs Gold Loan – The Definitions

A Gold Loan is a secured loan wherein you must pledge your gold assets like gold coins, bars, jewellery, etc., as collateral. The lender considers the weight of the gold to determine the loan amount. The lender returns your collateral once you repay the loan.

A Personal Loan is a secured loan wherein you do not need to provide collateral. Lenders typically consider your income, employment status, and credit score to assess your eligibility. Today, most lenders provide Instant Personal Loans, for which you can apply online.

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Gold Loan or Personal Loan – Which is Better?

Consider these features to assess the better option between Personal Loan Vs Gold Loan.

Loan amount

Although lenders provide high Personal Loan amounts, they typically set a maximum permissible limit, beyond which you cannot borrow money. As for Gold Loans, there is no specific maximum loan amount you can obtain. However, per the Reserve Bank of India, lenders may sanction only up to 75% of the current market value of the gold as a loan.


You must repay your Personal Loans in Equated Monthly Instalments (EMIs) comprising both, the principal and interest components. With Gold Loans, get two repayment options. You may pay only the interest component during the loan term or the entire interest amount during loan disbursal. In both cases, you can repay the principal amount when the loan matures.

Loan tenure

Lenders typically provide Personal Loan repayment tenures lasting up to five years. In comparison, you must repay your Gold Loan within three years. You may check with your lender for Gold Loan extension schemes if you cannot repay the loan within the stipulated tenure.

Interest rate and security

Lenders levy lower interest rates on Gold Loans since the gold you pledge as collateral remains in the lender’s custody. If you fail to repay the loan, the lender can recoup their investment by selling the gold. On the other hand, the rate of Interest on the Personal Loan is slightly higher since it is an unsecured loan with no room for lenders to recoup their investment.

Which is Better? Gold Loan or Personal Loan

Both Gold Loans and Personal Loans are excellent as they help you finance your various expenses without any end-use restrictions. The better option for you depends on the loan amount, whether you need a longer repayment tenure or are comfortable with mortgaging your gold. Today you can even consider Instant Personal Loans, through which you can get fund disbursals within hours.

Download the digibank mobile app on your smartphone. Launch the app and click on the "Get Personal Loan" link on the login page.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.