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When it comes to fulfilling immediate financial needs, you often find yourself exploring various loan options. Two common choices are gold loans and personal loans. While both serve the purpose of providing funds, they differ significantly in terms of collateral, interest rates, and eligibility criteria.

Key Differences

Here's a breakdown of the significant differences between gold loans and personal loans available on Bajaj Markets:


Gold Loan

Personal Loan

Loan Amount

Up to 75% of appraised gold’s value

Up to ₹50 Lakhs

Interest Rate

8.88% p.a. onwards

9.99% p.a. onwards


Up to 60 months

Up to 72 months

Collateral Required



Number of Partners 



*Disclaimer: The aforementioned details are subject to change as per revisions in the lenders’ policies.

Let us understand these differences in further detail:

Interest Rates and Costs

Gold Loans often come with lower interest rates, usually starting from just 8.88% p.a. due to their secured nature. The gold you provide as collateral acts as a safeguard, leading to relatively lower interest rates. However, it is crucial to be vigilant about associated costs like processing fees and valuation charges.

On the flip side, personal loans, might entail slightly higher interest rates as they fall under the unsecured category. Generally personal interest rates start from 9.99% p.a. Thus, it is important to compare and check the rates prior to applying for the loan. Ensure to also scrutinise the fine print for processing fees and potential prepayment charges.

Loan Amount

A gold loan's loan amount correlates directly with the value of the gold you bring in. The more valuable your gold, the higher the loan amount. It is an apt choice for those seeking quick financial solutions which are usually more suitable for short-term requirements.

On the contrary, a personal loan’s amount is determined on the basis of your eligibility. This flexibility allows for larger loans and comes with a more extended repayment period, accommodating those with long-term financial goals.

Eligibility Criteria

The eligibility criteria are different for both loans. A gold loan is comparatively lenient on requirements like credit scores, as the mortgaged gold serves as collateral, lowering the risk of default. However, one criteria crucial to secure this loan is the purity of your gold. Usually, financial institutions require you to submit 22 to 24 karat gold as security. 

On the other hand, a personal loan puts more weight on credit scores and stable employment, making it imperative to maintain a good credit standing. Lenders offering personal loans analyse how well you fulfil these eligibility requirements to ensure your repayment capabilities.

Repayment Flexibility

When you opt for a gold loan, you can generally choose from repayment tenures ranging up to 60 months. You can make prepayments to close your loan prior to the end of the decided period. Furthermore, some lenders also opt for a part release facility, where on paying a certain amount you can receive a part of the gold you submitted as mortgage. 

Meanwhile, personal loans come with repayment structures that typically involve EMIs. If you opt for the flexi-loan option, you are charged interest only on the amount used from the sanctioned amount. This can help you save on repayment costs and use the borrowed amount flexibly.

Risks and Considerations

With a gold loan, the primary risk lies in the potential loss of your gold collateral in case of default. However, the silver lining is that it doesn't adversely impact your credit score.

In the case of a personal loan, the absence of collateral eliminates the risk of losing assets. However, defaulting on payments can have repercussions on your credit score.

Choosing the Right Loan

Consider a loan against loan when you need to gain access to funds instantly without having to sell your precious jewellery. These can be of great help when trying to borrow huge amounts and meet your short-term requirements easily.

On the other hand, a personal loan is a great choice if you are averse to mortgaging your assets. Whether it's funding a wedding, embarking on a dream vacation, or steadily pursuing long-term plans, this loan caters to a spectrum of needs.


Both gold loans and personal loans come with their own advantages and considerations. It is essential to make a well-informed decision that resonates with your financial vision and choose a loan that suits your requirements the best.


What is better - gold loan or a personal loan?

When facing financial emergencies, both loans come as an effective solution to meet varied financial obligations. However, if you have sufficient gold and require money on an urgent basis, you can opt for a gold loan and avail substantial amount. However, a personal loan involves considerable processing time as it is an unsecured loan. Therefore, one must select one that significant suits his/her requirements.

What are the disadvantages of a personal loan?

The disadvantages of a personal loan are listed below:

  • Most financial institutions impose considerable processing fees on the loan amount.

  • Being an unsecured variant, interest rate is comparatively on the higher side.

  • Also, lenders specify strict eligibility parameters before sanctioning the loan amount.

  • Unsecured loans, like personal loans come with a shorter repayment tenure.

What are the risks of a gold loan?

Usually, the risk of gold loan involves the loss of pledged gold ornaments when failing to repay the loan amount. When the borrower is unable to repay entire loan amount, lender has the authority to seize pledged gold and auction it in the market to recover remaining amount.

Can I use a personal loan to buy gold?

You can avail personal loan and use the funds anywhere, such as buying gold, without even informing them about the reason to the lender. However, you must only do so if you expect a higher profitable return on the investment than the interest you pay against the borrowed amount.

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