Gold loan Vs Personal loan, Choosing the Right One

There are two types of loans in India which can be availed for emergency purposes namely Gold loans and Personal loans. Both have their own pros and cons and it is important to analyze which loan is best suited for you. Check out the table below comparing Gold loans and Personal loans.








Gold Loan

Personal Loan

Interest rate

10% to 17% (Based on loan amount)

10% to 24% (Based on credit score)

Disbursement duration

30 minutes to 1 hour

1 day to 2 weeks

Processing fees

Nil to 1%

1% to 3%

Pre-payment charges

Nil to 1%

1% to 5%

Income proof

Not Required



ID & Address proof

ID, Address, Bank statement, salary slips, ITR, etc.


Starting from 3 months to maximum of 12months in most cases

1 to 7 years

From the above table, you may think that Gold loans are the better option, but don't be hasty in your decision. Both has its pros and cons

Gold loans

Gold loan will help you to get access to the funds you need and hold your gold as a lien

Low-interest rate
Low disbursement time
Nil or very low prepayment and processing fees
Less documentation

High margin for bank – loan for only 75% of gold value is given
Need to keep your gold as collateral – risk of gold liquidity
Short tenure – Loan is available only for a very short tenure

Personal loans

A personal loan is ideal for immediate cash needs such as marriage and travel expenses, house renovation or even to pay back outstanding credit card debts.

High-interest rate
Higher disbursement time
Has prepayment and processing fees
Lot of documentation and verification required

No collateral is needed i.e. no asset (Gold, insurance policy or fixed deposit) is leveraged here.
Personal loans can be availed for a longer tenure and hence gives versatility where the borrower can use it for any use be it marriage, rent advance etc.

As you can see each type of loan has its own pros and cons. The borrower needs to weigh in on every aspect and match it with their requirement before opting for any loan. We hope this article would have helped you get the full picture with respect to both these credit products.

Taking a personal loan or gold loan is the first step, to maintain a good credit score it is important that you make timely payments which will enable you to maintain a good credit score.

Check out CreditMantri where we can help you choose the best option matching your needs.