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Financial emergencies can creep up at any time. There are multiple credit options available in the market that individuals can utilise to arrange the funds to meet varied personal and professional requirements. When considering the options available to overcome a shortage of funds arising out of emergencies or income loss, both personal loans and gold loans are considered popular choices among individuals.

However, if you are willing to identify between a gold loan vs personal loan that suits your requirements, it is essential to learn about them in detail. Therefore, before making an informed decision, let’s dig into the concepts of gold loans and personal loan.

What is Gold Loan

gold loan is a secured credit that an individual borrows from a lender against the mortgage of gold ornaments. Usually, the amount is sanctioned on the basis of a certain percentage of gold’s value. The amount obtained by mortgaging gold ornaments can be repaid through EMIs. 

Unlike other secured loans, there is no such end-use restriction on the use of funds. So, irrespective of your requirements, a gold loan can be an ideal financing option to meet varied requirements.

What is Personal Loan

personal loan is essentially an unsecured credit variant that allows borrowers to meet their legitimate financial requirements with ease. Moreover, it is quite convenient to avail personal loan as it does not demand any collateral and comes with no end-use restriction on how to use the funds.

So, whether it is a medical emergency, home renovation or funding a child’s education, personal loans are always an ideal solution to manage these expenses. Note that borrowers can pay off the loans in comfortable EMIs.

Differences between Gold Loan and Personal Loan

After learning about the concepts of gold loan and personal loan, borrowers need to learn about the difference between the two to identify gold loan vs personal loan, which is better. Following is the table drawn below for your reference to understand the difference and make a prudent choice:

Differentiating factors

Gold loan

Personal loan


One of the significant differences is that a gold loan is a secured loan product, and the funds can be obtained after pledging gold as collateral. The pledged gold remains as the security, depending on which loan is offered to the borrower.

On the other hand, since a personal loan is an unsecured variant, no collateral is required. Instead, loan amount is sanctioned based on the borrower’s income, repayment history and credit score.

Interest rate

Usually, interest rates on gold loans vary across lenders. It can go higher depending on the market rate and demand for gold.

Availing of personal loans from reputed financial institutions entirely depends on borrower’s repayment ability and creditworthiness.


Usually, gold loan documentation includes KYC documents, gold ownership proof, address proof and additional papers based on the lender’s terms and conditions.

In contrast to that, personal loan documents involve KYC documents, address proof, income proof, financial statements. Besides, the sanctioned amount will depend on the income and employment details provided by the borrower.

Additional charges 

Gold loan lenders may impose service charges, processing fees, insurance and gold valuation charges, administrative fee etc. However, large-scale gold loan lenders do not levy any charge for the prepayment.

On the other hand, personal loan lenders may impose service charges, administrative and processing fee. However, these charges will vary across lenders.

Processing time

In the context of gold loans, funds are disbursed within a few hours based on the gold mortgaged as security. After the gold is handed over, its value is estimated depending on the current market price, weight and purity of the gold.

When considering personal loans, the processing time is relatively higher. This is because there is no involvement of collateral, and the lender needs to verify the borrower’s creditworthiness and authenticity of the documents.

From this table, borrowers will be able to differentiate between gold loan vs personal loan and select one that best suits their requirements.

Gold Loan vs. Personal Loan: How to Choose Between the Two for Meeting Your Needs

While comparing gold loan vs personal loan, following are some of the essential factors that will allow borrowers to make the informed decision:

1. Gold Loan: Pros and Cons

  • Since a gold loan is a secured financing option, lenders usually offer up to 75% of the gold value as collateral.

  • The loan approval process is quite simplified and convenient.

  • Credit score is not mandatory as it is a secured loan.

  • Gold loan comes with a flexible repayment option

  • Failing to repay the loan will allow lenders to liquidate the asset to recover the money.

2. Personal Loans: Pros and Cons

  • Since it is an unsecured loan, borrowers do not have to mortgage any high-end asset as collateral.

  • Borrowers need to fulfil simple eligibility parameters to avail of the funds. Make sure to have a credit score of 750+ to get hassle-free approval.

  • Repayment duration can be selected based on the borrower’s affordability.

  • It involves extensive documentation and verification before the amount is disbursed into borrower’s account.

To conclude, with regards to gold loan vs personal loan, one must thoroughly go through the terms and conditions of the lender. Also, by conducting thorough research about both loans, one can avail of right loan product that suits his/her requirements.

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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.

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.

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.

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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