Is a gold loan a better deal than a personal loan?

Personal loan

An unsecured loan given on the basis of your income, financial history, and credit score.

Gold Loan

A secured loan given by a bank or financial institution against the value of your gold ornaments, gold jewellery or gold coins.

Personal loan

Based on the average monthly income, repayment capacity, credit history and existing EMIs the maximum loan amount can be up to 50 lakh.

Gold Loan

The value of gold is calculated based on purity and current market value

• You are offered 60-85% of this total value

As the gold asset acts as security for the loan amount, interest rates on gold loans are lower than that for personal loans

Personal loan

16% to 24%

Gold Loan

12% to 16%

Personal loan

If your repayment period stretches up to 7 years, a personal loan would be better

Gold Loan

If your repayment period is short-term (ranging from 7 days to 3 years) a gold loan would be a suitable option

Personal loan

Applications for personal loans must adhere to a stringent vetting process, so processing fees could range from 1% to 3%

Gold Loan

Gold loans do not require too many credit checks, and processing fees are comparatively low - between 0.5 and 1.5%

Personal loan

Personal loans need processing time, and in some instances, the lender may ask for a guarantor to vouch for you. Thus, personal loans can take a few hours to few days for disbursal

Gold Loan

If all the papers are in place, you could get a gold loan in a few hours

Personal loan

Usually through EMIs, but nowadays banks allow flexible repayment options

Gold Loan

1. Through EMIs,
2. You can pay interest upfront and the principal amount at the end of the loan tenure
3. You can pay interest monthly and the principal amount at the end of the loan tenure

Personal loan

Personal loans may have a lock-in tenure and may charge a penalty on pre-closure

Gold Loan

Gold loans are usually slightly more flexible and seldom levy a penalty on prepayment

Disclaimer - This infographic is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.