When you need urgent money, two popular loan options often come to mind – gold loans and personal loans. While personal loans are unsecured, gold loans are secured against your gold ornaments. In 2025, gold loans are gaining more popularity due to their affordability, quick approval, and simple eligibility. This article explains the benefits of taking a gold loan over a personal loan, with a detailed comparison to help you choose wisely.
Key Differences Between Gold Loan and Personal Loan
To understand why gold loans are often better, let’s first compare them with personal loans.
| Feature | Gold Loan | Personal Loan |
|---|---|---|
| Security | Secured (against gold) | Unsecured |
| Interest Rate | 7% – 12% p.a. | 10% – 24% p.a. |
| Loan Tenure | 6 months – 5 years | 1 – 7 years |
| Processing Time | Instant (few hours) | 1 – 3 days |
| Credit Score Required | Not mandatory | Mandatory (700+ preferred) |
| Maximum Loan Amount | Depends on gold value | Based on income & credit history |
Why Gold Loan is Better Than Personal Loan in 2025
1. Lower Interest Rates
Gold loans usually have much lower interest rates (starting from 7% per annum) compared to personal loans, which may go as high as 24%. This makes gold loans a cheaper borrowing option.
2. Instant Loan Approval
With minimal paperwork, gold loans are disbursed within hours. Personal loans, on the other hand, involve credit checks and income verification, leading to delays.
3. No Credit Score Requirement
If you don’t have a high credit score, getting a personal loan can be difficult. But gold loans are given based on the value of your gold, so even borrowers with low or no credit history can apply.
4. Flexible Repayment Options
Gold loans come with multiple repayment methods – EMI, bullet repayment, and part payment. Personal loans usually have only EMI-based repayment.
5. Higher Loan-to-Value Ratio
As per RBI guidelines, lenders can provide up to 75% of the gold’s market value as a loan. This gives borrowers quick access to large amounts.
6. Safe and Secure Asset Storage
Banks and NBFCs store your pledged gold safely in vaults with full insurance coverage. You get back your gold once the loan is repaid.
7. No Restrictions on Loan Usage
Both personal and gold loans can be used for any purpose – medical expenses, education, business, or travel. But since gold loans are cheaper and faster, they are more convenient.
Example – Comparing Costs of Gold Loan vs Personal Loan
Let’s say you need ₹2,00,000 for medical expenses.
- Gold Loan: At 9% interest, 1-year EMI = approx. ₹17,540, total repayment = ₹2,10,480
- Personal Loan: At 18% interest, 1-year EMI = approx. ₹18,340, total repayment = ₹2,20,080
Clearly, a gold loan saves you nearly ₹10,000 in just one year.
When Should You Prefer a Personal Loan?
While gold loans are generally better, personal loans can be useful in these cases:
- If you don’t have gold ornaments to pledge.
- If you need a long-term loan (more than 5 years).
- If you want higher amounts beyond the value of your gold.
Tips to Get the Best Gold Loan in 2025
- Compare interest rates of multiple banks and NBFCs.
- Check processing fees and foreclosure charges.
- Pledge hallmarked gold to get better value.
- Choose a flexible repayment method suitable for you.
Conclusion
In 2025, gold loans are undoubtedly a better financial choice than personal loans for most borrowers. With lower interest rates, instant approval, and flexible repayment, gold loans provide quick financial relief without burdening borrowers. Unless you require a very long-term loan or do not own gold, a gold loan is the smarter and more affordable option