gold vs personal loan

Should you go for a personal loan or gold loan?

Gold is still the most attractive element in India. Majority of Indians have a fascination for gold. You will find people eagerly wishing for the price of gold to decrease. Often Indians believe that gold will be a saviour in certain crisis situations. It is considered as the most superior element among all precious metals. Not only traditionally but gold rules the market professionally as well. Exchanging gold in return of money has been and will be the most popular type of applying for a loan.

Indians always use this element to get a loan faster than any other medium. The overall paperwork in the gold loan is not needed as such. Bank gives a loan to applier in exchange of gold in a short span of time, within a day. The reason behind the fast granting of a gold loan is the value of the element which is recognized by the financial institutions. In case the person is unable to repay the amount the bank will auction the gold and realize its dues. This makes sense and a convincible aspect for the bank.

Talking about the personal loan and making a differentiation with the gold loan, personal loans take certain paper works and longer time span to make the loan granted. Often banks want guarantors who take all responsibility to repay the amount and takes all responsibility of the loan amount, in case the original borrower defaults. Personal loans for poor credits goes through several stages of the investigation and second though before actually applying for the loan. The lender always makes sure that the person is able to repay the loan. If the predicted creditability of the applier is not convincing the loan is disbursed.

Whereas gold loans whereas stand with freedom of fast granting of the loan amount due to the expensive value of the element. Gold loans though enjoy faster processing, it also suffers from some cons. Gold is something which is precious and expensive. Middle and higher class people can afford to take a loan against gold. The lower class people often suffer due to the inability to buy gold due to their expensiveness. In those cases, they can apply for personal loans. It is one of the best possible ways one can borrow money from lenders especially when they are looking for personal loans for bad credits.

Keeping the detailed information aside let us consider some of the differences which would make indicate which loan system is better – gold loan or personal loan

Interest rate

The rate of interest ranges from 13% to 14% while offering a loan against gold. Tenure of 1 year is given to gold loan.

While personal loans come with an interest of 16% to 25% depending upon the creditability of the borrower. Different financial institutions offer a different rate of interest depending upon the structure of interest of different institutions.


Gold often enjoys the security with the bank. Bank considers gold as a secure and trustable element. In non-payment situations, the bank often gives a reminder to the loan borrowers. If they fail to repay the debts, the amount of gold which they deposited are auctioned to get back the dues. It is a clean process and does not require any paperwork. The gold loan system does not require any guarantors.

In the case of personal loans, the process is a bit critical. The person needs to show proper documentation to the lender and if the lender finds the documents convincible they grant the loan. Unlike gold loan in personal loans, the borrower needs to arrange for a guarantor. A guarantor is a person who insists the banks grant for the loan. Also, the guarantor makes the bank recognize the borrower as authentic and loyal. If in any case, the borrower is unable to repay the debt to the bank, the guarantor holds all responsibility to repay the amount to the bank.


Basic KYC documentation is needed while applying for a gold loan such as driving license, AADHAR card, passport and voter ID along with address proof such as electricity bill, telephone bill and other bills of utility. These paper works are basic and require to judge the authenticity of the borrower.

While in the personal loan the process is lengthy. Along with the above documents the person also needs to show the work profile, assets details, banks details, bank statement, income proof etc. This is considered complicated as there is no such security against which the borrower is applying for a loan. The documentation is the only records and a guarantor under whose insistence the bank offers loans.

Time required

The gold loan does not require much time. Within 5 minutes the loan gets sanctioned if proper process is initiated along with proper documentation.

Whereas personal loan often suffers from a crucial time of 48 hours which his comparatively long. During emergency personal loan will not make sense. Due to the complexities, personal loan takes longer time than gold loans.


The differentiation is mentioned above. It is now easy to indicate which loan system has pros which loan system suffers from cons. Gold loans are often helpful while personal loans take time.

Author bio

Soniya Sharma has been working as a professional charter account at loanClix – Besthome loan finance company in India. She loves to share excellent stuff about home equity loan, low-interest personal loans etc. You can also follow her on various social media platforms such as Twitter, Facebook.

Leave a Reply

Your email address will not be published. Required fields are marked *