Difference Between Gold Loans and Personal Loans: Which is Better?

Disclaimer: Ujjivan Small Finance Bank does not offer personal loans. This blog is written for generic information only,

July 21, 2025

gold-loan-vs-personal-loan

When faced with financial needs, many of us turn to loans as a solution. Though personal loans generally are a preferred option, higher interest rates and strict eligibility criteria often become a hindrance, especially when you’re in need of urgent cash. Probably that’s the reason why a lot of consumers are opting for Gold Loans. 

 

In this article, we have dug deep into the realms of both types of loans so that you can make an informed decision. Read this article to know which type of loan could be more suitable for you.

 

What is a Personal Loan?

Personal loans are unsecured loans, meaning you don’t have to pledge a collateral to secure a loan. Banks assess your creditworthiness, income, credit history and repayment capacity, among other factors to check your eligibility. The interest rates of personal loans are generally higher compared to secured loans like home loans and gold loans. Since you don’t have to hand over any collateral, the risk in terms of loan recovery is higher, hence you’re charged hefty interest rates. However, unlike home loans, where you can use the funds only for property purchase, you can use a personal loan to meet any financial needs.

 

Key Points:

  • Personal loans provide flexibility in terms of loan amount, tenure, and repayment options.
  • Interest rates on personal loans are generally higher compared to secured loans like gold loans.
  • The loan tenure for personal loans can range from 6 months to 5 years.
  • Repayment of personal loans is usually done through Equated Monthly Installments (EMIs) that include both principal and interest components.
  • As personal loans are unsecured, the lender does not have any collateral to fall back on in case of default. Thus, they rely heavily on the borrower's creditworthiness.
  • You can get loans up to ₹10 lakh.

 

What is a Gold Loan?

Gold loans are secured loans that use gold as collateral. You pledge gold assets (jewellery or coins) with the lender in exchange for funds. The loan amount sanctioned is usually a percentage of the value of the gold pledged. The percentage could range from 73% to 80% of the market value of the gold. Banks don’t check your credit history or ask for income proof to determine your loan eligibility – everything is based on the value of the pledged gold. Unlike other secured loans, where loans are provided to meet a specific requirement, there are no end-restrictions for gold loans.

 

Key Points:

  • Gold loans offer quick access to funds without lengthy paperwork or credit checks.
  • Interest rates on gold loans are generally lower compared to other types of secured or unsecured loans.
  • The loan tenure for gold loans is typically shorter, ranging from 6 months to 3 years.
  • The repayment of a gold loan can be done through monthly installments or as a lump sum at the end of the tenure.
  • In case of default on repayment, the lender has the right to sell the pledged gold to recover the funds.
  • You can get loans up to ₹25 lakh

 

Gold Loan vs Personal Loan: A Quick Loan Comparison

It is always a good idea to do a loan comparison between gold loans vs personal loans before you choose the right option. Here is a concise table with a clear loan comparison.

 

FeatureGold LoanPersonal Loan
CollateralRequires gold as collateralNo collateral required
Interest RatesGenerally lower than personal loansMuch higher than gold loans
Approval ProcessQuick approval (often within hours)May take longer due to verification
Loan AmountBased on gold value; big ticket-sizeDepends on creditworthiness income and other factors; smaller ticket size
Repayment TenureShorter terms (usually up to 3 years)Longer terms (up to 5 years)
Credit Score ImpactMinimal impact; lower or no scores acceptableHigher scores generally required

 

Gold Loan vs Personal Loan: Which One to Choose?

After a quick comparison, let us tell you when you should choose a gold loan and when to choose a personal loan. 

 

Scenarios for Choosing Gold Loans:

  • Although both gold loans and personal loans serve different purposes, there are specific scenarios where a gold loan might be more suitable:
  • Urgent financial needs: Gold loans offer quick access to funds, making them suitable for emergencies or immediate expenses.
  • Low or no credit score: Individuals with a poor credit history can still obtain a gold loan as it is primarily secured by the collateral.
  • Short-term requirements: If you require funds for a short period, such as for a wedding or to bridge a financial gap, a gold loan can be an ideal choice.
  • Higher loan amount: In case you need a higher loan amount with minimum hassle, opt for a gold loan.

 

Scenarios for Choosing Personal Loans:

  • While gold loans have their advantages, personal loans may be more suitable for the following scenarios:
  • No collateral available: If you do not have any gold assets to pledge, a personal loan allows you to borrow funds without providing any collateral.
  • Long repayment tenure: Personal loans offer longer repayment periods, allowing borrowers to manage their finances better with affordable EMIs.
  • Short-term requirements: Let’s say you need ₹25,000 cash urgently and you’re sure that you can repay the loan in two instalments, you can opt for a personal loan. 

Final Thoughts

Choosing between a gold loan and personal loan depends on your specific financial needs and circumstances. If you have gold assets available for pledging, need quick funds, or have a low credit score, a gold loan might be the better option. 

 

Get Gold Loans up to ₹25 lakh at attractive interest rates with Ujjivan Small Finance Bank. Enjoy quick disbursal and a stress-free loan journey.

 

Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

 

Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user’s own risk.  Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.

 

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FAQs

1. What is the difference between a gold loan vs personal loan?

The main difference lies in the collateral required. Gold loans use gold as collateral, while personal loans don’t require any collateral.

2. What is the maximum tenure for a personal loan?

The tenure for personal loans can vary from 1 to 5 years or even longer, depending on the lender's terms and conditions.

3. When comparing gold loan vs personal loan, which has quicker approval?

Gold loans have a faster loan approval process. 

4. Can I use a gold loan for any purpose?

Yes, gold loans can be used for various purposes like home renovations, medical emergencies, education expenses, etc.

5. Which one has higher interest rate – gold loan or personal loan?

Personal loans are unsecured loans. Loan recovery risks are higher. Hence, banks charge higher interest rates for personal loans. 

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