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Gold Loan Vs Personal Loan & Which Is The Best Option for You


As of September 2021, the total personal loan outstanding was Rs. 29.2 lakh crores. 

On the other hand, as of March 2021, outstanding loans against gold jewellery was Rs. 60,464 crores. 

There are times when you might require urgent cash, and you do not have the required money. For instance, in an emergency, or for a wedding, house repair, higher education, etc. 

In the modern age, there are numerous methods people can use to get money.

Gold loans and personal loans are the most widely used method to get financing, but which is better? 

Gold Loan Vs Personal Loan

Both options differ from each other; let us see a few differences. 

  1. Interest Rate

Gold finance is a type of secured loan, i.e., it is secured by collateral (gold). In contrast, a personal loan is an unsecured loan. 

Thus, the interest rate charged on a personal loan is higher than a gold loan. 

Interest rates on personal loans range between 12-26% p.a., and gold loans range between 7.35%-29% p.a.

With Muthoot FinCorp, you can avail of a gold loan at attractive interest rates starting from 6.90% p.a.

  1. Documents Required

As gold finance is secured, lending institutions require only a few documents such as identity and address proof, and no credit score or income proof is required. 

In contrast, personal loans are unsecured, requiring more documents than gold loans and giving more significance to credit score and income proof. 

  1. Processing Time

Personal loans require more processing time than gold loans. 

This is because personal loans are unsecured loans, and the lender will have to examine the borrower’s credit history and check the validity of other documents before approving the loan. 

With Muthoot FinCorp, gold finance approval is immediate, and the money is processed within 30 minutes upon receipt of documents.

  1. Loan Amount

When it comes to gold loans, the amount you can borrow depends on the value of your gold, which is computed based on its purity and weight. So, the credit score and borrower’s income has no impact on the loan amount. 

On the other hand, for personal loans, the amount of money that can be borrowed is based on a person’s credit history and income. If an individual has a bad credit score, they may have difficulty getting the maximum loan amount. 

With Muthoot FinCorp, an individual can get a maximum gold loan amount of up to Rs. 50 Lakhs.

  1. Processing Fees 

The processing fee for gold finance is minimal, varying from 0.25 – 1% of the loan. This is because it does not need much documentation to get approved.

Personal loans, on the other hand, requires a lot of checking, which can be time-consuming and complicated. Thus, they have higher processing fees, i.e., 0.5 – 2% of the loan amount.

With Muthoot FinCorp, the gold loan processing fees are minimal, i.e., Rs. 20 to 0.25% of the loan amount. 

The type of loan, i.e., personal or gold loan, that borrowers can take out from a lender should be tailored to their needs and preferences. 

Gold loans might be great for those who need money for a short period, as this type of loan typically has lower interest rates than traditional personal loans. Conversely, if you need money for an extended period, you might consider getting a personal loan as you do not have to provide any collateral. 

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