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Gold Loan or Personal Loan – Which one is better?

Gold Loan Or Personal Loan: Financial unexpected events typically occur without warning. Taking out a loan is frequently the only option to survive such emergencies. A loan can come in quite handy, whether you need it to cover a medical emergency or pay for your sister’s wedding. Personal loans and gold loans are two of the most popular types of loans accessible on the market to suit your demands. So how does one decide between a personal loan and a gold loan? Let’s read in this blog all about Gold Loan vs Personal loan.

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Gold Loan:

A gold loan is a type of loan in which you need to pledge your gold assets in the form of jewelry or coins as collateral. Typically, up to 75%-80% of the total gold value is offered based on the current market value and quality of gold. The loan amount is calculated on the basis of the Loan to Value (LTV) ratio. You can repay your gold loan through monthly installments.

If the loan is used for the purchase/construction of a residential property, you can claim a tax deduction of up to Rs. 2 lakhs in a year under Section 24 of the Income Tax Act, 1961. You can also avail of tax deduction under Section 80C of the Income Tax Act, 1961. This deduction is meant for the principal amount and is capped at Rs. 1.5 lakhs per year.

Advantages of Gold Loan

  • Unlike other secured loans like a home loan or car loan, there is no restriction on the end use of gold loans.
  • Most banks and financial institutions offer gold loans at affordable interest rates.
  • The loan approval and disbursal processes are swift and hassle-free.
  • You do not need a good credit history to get a gold loan.

Disadvantages of Gold Loan

  • One of the major drawbacks of gold loans is that if you are unable to repay the loan, the lender upholds the legal right to liquidate your gold to recover the money.
  • Secondly, when you avail of a gold loan, the  loan-to-value ratio (LTV) varies from lender to lender. The maximum amount that you can get is up to 80% of the value of the pledged gold.
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Personal Loan

A personal loan is an unsecured loan. This means that you do not have to provide collateral to get funds. As long as the lender considers you creditworthy, you will be eligible for a loan. Depending on the lender’s policy, you need to prove your eligibility based on your income, repayment capacity, nature of employment, and credit history, among other factors.

Advantages of Personal Loan

  • You can get the loan without a security deposit or collateral, making it a less risky form of financing.
  • Interest rates are significantly lower than other unsecured loans like credit cards.
  • Personal loans can be used to consolidate smaller high-interest debts by combining all outstanding payments into a single monthly payment.
  • Personal loans can be used to improve your credit score in case you have different types of existing credit.

Disadvantages of Personal Loan

  • A significant disadvantage of personal loan is that it attracts fees and penalties that can increase the cost of borrowing. Depending upon your lender, you may have to cough up processing fees ranging anywhere from 1% to 6% of the loan amount.
  • Secondly, getting a personal loan at a low-interest rate totally depends on your credit score. This means that if you have a poor or low credit score, it is unlikely that you will stand a chance to get a personal loan.
  • Also, if you have ever missed paying your Equated Monthly Instalments (EMI) on a previous lending product, it may be problematic for you to get the loan you want.
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Comparison of Personal Loan vs Gold Loan

ParametersGold LoanPersonal Loan
Loan AmountUp to Rs. 25 lakhsRs. 50,000 to Rs. 20 lakhs
Interest Rates7.7% per annum onwards8.50% – 13.60% per annum
Processing TimeCan be sanctioned in 90 to 120 minCan take anywhere from 24 hours to 7 working days
Loan Tenure12 months to 36 months48 months to 84 months
EligibilityIndividuals applying for the loan should be the owners of the gold ornaments or specially minted gold coins sold by banksThe maximum limit is up to 50 gm per borrowerBorrower should be an Indian residentBorrower should be aged between 21 and 65 yearsThey must be a resident of India
They should be employed by an MNC, private or public limited company, Govt etc.
A minimum CIBIL score of 701 is required
KYC documents Aadhaar/PAN/Passport/Voter’s ID Card
3-months’ salary slips/ IT Returns needed
3-months bank account statement needed
RepaymentEquated Monthly Instalments (EMIs) need to be paid monthly. The principal can be repaid by way of a lump-sum payment at any time during the tenure of the loan.EMI needs to be paid on monthly basis.
You can generally foreclose or prepay your loan 6 months after the date it has been disbursed, without any prepayment penalty.
Processing feeNo processing fee for loans up to Rs. 25,000. Loans from Rs. 25,000 up to Rs. 25 lakhs will have applicable charges + GST.2% of the loan amount subject to minimum of Rs.1,000 and maximum of Rs.10,000.
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Disclaimer: The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon.Also, and its members do not accept any liability, obligation or responsibility for author’s article and understanding of user.



  1. gold loan for good sleep to the company with low returns
    and personal loan for good return to the company with sleepless nights.


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