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Gold Loan vs. Personal Loan - Which is Better & Why?

Published on Feb 16, 2021Updated on May 21, 2024

Gold Loan vs. Personal Loan - Which is Better & Why?

Sometimes, funds may be needed at a short notice. Today, there are many options which one can use to arrange for funds. A couple of extremely popular options are – gold loans and personal loans.

However, there are multiple aspects to consider when it comes to interest rates, collateral, charges etc. Therefore, when you have to choose between a gold loan and a personal loan, it is extremely important to understand the advantages and disadvantages so that you can pick carefully.

Gold Loan vs Personal Loan - Important Differences

Here are few differences between Gold and personal loans, which may help you make a prudent choice:

1. Secured vs Unsecured loan

One of the biggest differences is that a gold loan is a secured loan, which means that a gold loan needs gold to be pledged as collateral. This can be gold jewellery, gold coins, etc which is taken as security by the lender. This gold remains as insurance or security based on which loan is given to the borrower. If the borrower fails to repay the loan, the lender can use the pledged gold to recover the due amount. Typically up to 90% of the gold value is sanctioned as a loan. Please note that lenders never consider making charges or the value of any precious stones on the jewellery pledged, and hence the overall value they estimate for the pledged assets may be well below the market rate.

A Personal loan is an unsecured loan or signature loan, since no collateral is required to be given. A personal loan is approved on the basis of the borrower’s creditworthiness and other eligibility criteria as per the lender’s policy such as income, repayment capacity, nature of employment, etc.

Hence if you do not have gold to be given as security, or do not wish to pledge your gold jewellery, then personal loan could be a preferable option. Also, for people looking for a bigger loan amount, a personal loan may be more suitable so that you do not have to give away huge amounts of your precious gold assets for long periods. This is the greatest advantage of personal loans. You are not required to pledge any asset or security with your lender to get the loan. This feature certainly makes personal loan a preferable loan option over other loans.

Must Read: 5 Common Personal Loan Myths you Should Ignore

2. Repayment

Gold loan tenure usually ranges between 3 months to 3 years. Personal loan tenures span between one to five years.

Personal loan would be a better choice for those seeking a longer tenure. This way, borrowers can plan their monthly outgoing more efficiently. Also, this gives a better chance to maintain a healthier credit score. A flexible repayment tenure lets borrowers select a suitable tenure and manage their expenses methodically.

3. Interest Rate

Interest rate on a gold loan depends from lender to lender. Gold loans could go upto 24% per annum in some cases. Personal loans are offered at attractive interest rates like 11.99% - but the rate which is offered to a borrower will completely depend on the borrower’s eligibility and credit worthiness.

So depending on other factors like security and repayment, borrowers can get more details on the lowest interest rate on personal loan as well as gold loan based on their individual profile / eligibility, and then make an informed decision.

4. Documentation

Gold loan documentation includes identity proof, address proof, proof of ownership of the pledged assets, and other documents depending on the lender’s norms. Documents required for personal loan include PAN, identity proof, address proof, and income proof and bank statements. The loan amount depends upon income and employment details submitted by the borrower. However, personal loans do not involve elaborate paperwork.

Must Read: How To Apply For A Personal Loan using SMFG India Credit InstaLoan App?

5. Other Charges

Gold loan lenders may charge borrowers processing fees, insurance and service charges, gold valuation charges, documentation fee, administrative charges, etc. Personal loan lenders may charge processing fees and insurance and service charges.

Borrowers should find out details about the complete list of applicable charges from respective lenders to get complete clarity.

6. Processing Speed

Gold loan processing may take a few days. Borrowers are needed to pledge gold assets and basic KYC documents to get the loan. Once the gold valuation is complete, the loan can be disbursed.

When it comes to personal loans, lenders like SMFG India Credit offer instant personal loan online, wherein once borrowers submit their application online, upload documents and the same gets successfully verified and approved, the funds are disbursed within a few hours, sometimes even faster. SMFG India Credit’s personal loan calculator also assists applicants in getting an idea of the maximum personal loan eligibility amount.

SMFG India Credit’s instant personal loan online is paperless and borrowers can apply online comfortably from the comfort of their homes.

Gold Loan vs Personal Loan - Infographic


The final choice between a personal loan and a gold loan completely depends on the borrowers’ current financial situation and needs. Borrowers with long-term financial requirements usually prefer personal loans. Personal loans are unsecured loans that are ideal for fulfilling financial obligations, and have become an extremely popular option among borrowers to tide over any requirement in the fastest, most convenient possible way.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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