Gold Loan Vs Personal Loan: Which Option is Better for You?

In the current situation of the Covid-19 pandemic, many individuals have lost jobs or witnessed pay cuts. So it is evident that they must be facing a financial crisis. When you face any liquidity crunch, then both personal loan and Gold Loan can help in this case. However, both of these loans vary from each other in terms of interest rates and processing charges, ease of access, impact on credit score, and repayment flexibility. The essential point of difference is the documents required for personal loanand a gold loan varies. It will help if you weigh both the options keeping your requirements in mind before choosing one.

For individual requirements, most people find it difficult to decide between the option of a personal loan or a gold loan.

Here are some of the points of comparison between personal loans and gold loans.

Gold Loan 

Gold loans are a type of secured loan where you would have to keep your gold jewelry or coins as collateral for your credit requirement. It is a good option to fulfill your instant money requirements. The following are some of the features and benefit of gold loans:

Features of Gold Loan

  • High Loan Amount:Gold loan usually provides a higher maximum cap on the loan amount than Personal Loan. Most financial institutions offer personal loans for up to Rs. 40 lakhs, whereas offering gold loans to a maximum of Rs. 5 crores.
  • No Credit History Requirement:With gold loans, you do not have to worry about your credit score as lenders do not consider your credit history.
  • Low-Interest Rates: Usually, gold loans come with lower interest rates. The cost of the gold loan is less than other loan types.
  • Repayment Flexibility: Gold loans offer several repayment options, unlike other types of loans. Like regular EMIs options, you repay only the interest part during the loan tenure and pay off the rest at the end of the term.

Personal Loan

Personal Loans are unsecured loans that suffice your instant financial obligations. Fullerton India’s personal loan solves several liquidity problems and is available for both salaried and self-employed individuals. Life can surprise you anytime in the form of opportunities or challenges. The following are some of the features and benefits of personal loans:

Features of Personal Loan

  • No Collateral:It is considered as the most significant advantage; borrowers are not required to keep any security as collateral while availing a personal loan.
  • Quick Disbursement:Most financial institutions credit the loan amount into the borrower’s account within 48 hours after the loan sanction.
  • Serves Several Purposes:Individuals can avail of personal loans for several purposes, such as your daughter’s wedding, home renovation, down payment on a new house, or for a family vacation.
  • Minimal Paperwork: Personal loans do not involve detailed paperwork. You need to provide necessary KYC information, documents required for personal loan
    and proof of income as required by the lender. It would help if you consider the following parameters while deciding on which loan suits your requirement:
  • Loan Requirement:If your collateral value is less than your loan requirement, a personal loan could be a suitable option if you’re eligible for the loan amount you want.
  • Credit Score:Lenders expect you to have a minimum credit score of 750 in order to consider you eligible for a personal loan. Due to its unsecured nature, they expect applicants to have a good credit history.
  • Income: Getting a personal loan could be difficult if you don’t have a steady income source.
  • Tenure: If you want to repay your loan within the coming year, then a gold loan is the best option. But if you are planning to repay the loan over three to five years in instalments, then a personal loan is a suitable option.


Before finalizing your decision, you must thoroughly compare your options across different loan products and financial institutions and select the one that suits your needs and offers the best repayment terms. Also, consider additional charges like processing fees and foreclosure charges apart from the applicable interest rate in your calculations.

It is necessary to ensure that you have a proper repayment plan because deferring on your payments could lead to loss of your asset, additional interest penalties, accumulation of debt, and a damaged credit score.