Personal Loans vs Gold Loans in 2025 - All Questions Answered
When faced with financial needs, loans often provide a viable solution. While personal loan highlights their versatility, their higher interest rates and stringent criteria can be a barrier. Gold loans offer a simple alternative with minimal eligibility requirements in such cases.
What is a Gold Loan?
If your question is, “Gold loan is secured or unsecured,” then you need to know that gold loan is a secured financial product. To obtain this loan, borrowers pledge their gold assets (jewellery or coins) as collateral. The sanctioned loan amount typically ranges up to 75% of the gold’s market value.
Unlike unsecured loans, there is no need for credit history or income proof; this loan is solely determined by the value of the pledged gold. Additionally, gold loans come with no end-use restrictions, offering flexibility for various financial needs. This makes gold loan comparison with unsecured options such as personal loans quite favourable for borrowers in urgent need of funds. You can quickly avail of gold loans from Indiagold which provides affordable gold loans and doorstep services.
Advantages and Disadvantages of Gold Loan
- Since a gold loan is secured, it allows borrowers to get up to 75% of the gold’s value.
- The approval and disbursal process is swift and often completed within hours.
- Credit history is not a critical factor, making it accessible for individuals with low or no credit scores.
- Borrowers have flexible repayment options tailored to their financial capabilities.
- However, if you fail to repay, the lender can liquidate the pledged gold to recover the loan amount.
What is a Personal Loan?
Personal loans are unsecured loans provided without any collateral. Lenders evaluate your creditworthiness, including your income, credit score, and repayment capacity. While they are versatile and can be used for multiple purposes, their higher interest rates reflect the risks involved. In a personal loans comparison with secured loans like gold loans, personal loans often carry stricter eligibility requirements and longer approval timelines.
Advantages and Disadvantages of Personal Loan
- No collateral is required, making it accessible for those without assets to pledge.
- Borrowers only need to meet simple eligibility criteria, such as maintaining a credit score of 685 or higher.
- This documentation is minimal, and funds are typically disbursed within 24 hours of approval.
- Borrowers can select flexible repayment tenures, sometimes extending up to 96 months.
- Flexi personal loans allow you to withdraw as needed and prepay when possible, reducing EMIs.
- However, higher interest rates and a significant reliance on credit scores can be drawbacks.
Difference Between Gold Loan and Personal Loan
The differences between gold and personal loans are:
1. Borrowing Limit
- Gold Loans: The borrowing limit is determined by the value of the pledged gold. Generally, lenders offer loan amounts ranging from Rs. 10,000 to Rs. 15 lakhs, depending on the weight, purity, and market value of the gold. This cap ensures the borrowers receive funds proportional to the pledged asset’s worth.
- Personal Loans: These come with a broader range, typically between Rs. 50,000 and Rs. 20 lakhs, or even higher, depending on the borrower’s income, credit score, and repayment capacity. This flexibility makes personal loans suitable for significant expenses like medical emergencies or debt consolidation.
2. Loan Duration:
- Gold Loans: Gold loans are generally short-term financial products with repayment tenures ranging from 6 months to 12 months. Some lenders may allow an extension, but the short tenure reflects the temporary nature of the loan and its reliance on collateral.
- Personal Loans: Personal loans offer more extended repayment options, typically ranging from 12 months to 60 months, This longer tenure allows borrowers to spread their repayment over a more manageable period, often with structured EMIs (Equated Monthly Installments), providing more financial breathing room.
3. Eligibility Requirements:
- Gold Loans: Eligibility for these loans is straightforward. Borrowers need to be 18 years or older and the legal owner of the gold they intend to pledge. Lenders do not typically evaluate income, credit history, or employment details. This makes gold loans accessible to a wider audience. However, the risk for lenders is minimal since they can liquidate the pledged gold if the borrowers default.
- Personal Loans: Personal loans, being unsecured, have stricter eligibility requirements. Borrowers must meet specific criteria, including age limit, stable income, good credit history, and often a credit score of 685 or higher. These requirements ensure that the lender minimises risks associated with loan approval.
4. Interest Rate:
- Gold Loans: Gold loan lowest interest rate as compared to personal loans. It usually ranges from 10% to 16%, as they are secured loans backed by tangible assets. With Indiagold, you can get gold loans starting from only 0.85% per month.
- Personal Loans: Personal loan rate of interest comparison to that of gold loans the former has higher interest rates. It is generally between 12% and 20% because they are unsecured loans. Without collateral, the lender assumes a higher risk, reflected in the increased cost of borrowing.
5. Approval Process:
- Gold Loans: These loans offer a quick and hassle-free approval process. Since the loan is secured by collateral, minimal documentation is required, and disbursement often happens within a few hours. This makes gold loans ideal for emergencies. Indiagold provides you with the scope to get gold loans within 30 minutes.
- Personal Loans: Personal loans have a more extensive approval process. Lenders conduct a thorough verification of documents, income proof, and credit scores, which can delay the approval by a few days.
6. Credit Score:
- Gold Loans: The borrower’s credit score has minimal impact on the loan approval process. Even individuals with low or no credit scores can secure this loan, as the lender’s risk is mitigated by the pledged gold.
- Personal Loans: This loan places a significant emphasis on the borrower’s credit score. A higher score not only increases the chances of approval but can also result in better interest rates and terms. Borrowers with poor credit scores may face challenges or be charged higher interest rates.
7. Additional Charges:
- Gold Loans: The processing fee for gold loans is typically around 1% of the loan amount, and the prepayment charges are also minimal, usually about 1%. Therefore, if your question is, “Which loan is cheaper,” then your answer is a gold loan.
- Personal Loans: The additional charges for this loan can be higher. The processing fee is often 2% or more of the loan amount, and the prepayment charges can range from 2% to 5%, depending on the lender’s policies.
Gold Loan vs Personal Loan: Which One Should You Choose?
When to choose gold loans:
- Urgent financial needs require fast access to funds.
- Borrowers with low or no credit scores.
- Short-term financial gaps like weddings or small-scale business needs.
- High loan amounts with minimal paperwork.
When to choose personal loans:
- Lack of collateral such as gold.
- Need for longer repayment tenure to manage finances better.
- Small, immediate financial needs, like Rs. 25,000 reputable in short installments.
Conclusion
Choosing between a gold loan and a personal loan depends on your financial situation. Gold loans are ideal for quick, short-term funding with fewer eligibility hurdles, while personal loans are better suited for long-term financial commitments and higher loan amounts. Carefully analyse factors like which is best for gold loans along with its interest rates and repayment tenure to make an informed decision. Rely on Indiagold as it is the provider of the best gold loan in India to get accessible funds at affordable rates.
