Gold Loan vs Personal Loan: Which Is Better for Lower Interest and Faster Approval?
Gold loans and personal loans are two popular borrowing options in India, especially with changing interest rates and tax rules in 2026. As of February 2026, the RBI’s repo rate is steady at 5.25 percent. Because of this, lenders are offering gold loans at interest rates between 8.5 percent and 12 percent per year. On the other hand, personal loan rates are higher, ranging from 10.5 percent to 18 percent. The right choice depends on your financial needs and situation. Let’s understand gold loan vs personal loan in terms of costs, rates, safety and more!
What is a Gold Loan
A gold loan allows you to borrow money by pledging your gold jewellery or ornaments as security with a bank or NBFC. The lender checks the purity and value of your gold and usually gives 50 to 75 percent of its value as the loan amount. The money is often disbursed within a few hours.
- You pledge your gold jewellery with a bank or NBFC and get 50%–75% of its market value as the loan amount
- Lenders assess purity first, and money hits your account within hours of approval
- You only pay interest on what you borrow, not a rupee more
- Repayment is flexible, either monthly EMIs or a bullet payment at the end, with tenures running 6 to 36 months
- Processing fees sit between 0.25% and 1% plus GST as of 2026
- No income proof required, just basic KYC to get started
What is a Personal Loan
A personal loan is an unsecured loan offered by banks or fintech companies. You do not need to pledge any asset. Approval is based on your credit score, income level, and job stability.
- Borrow up to Rs 50 lakh, with tenures stretching from 12 to 60 months, depending on the lender
- Every EMI covers both principal and interest, so your outgo stays fixed throughout the tenure.
- If your credit score is strong, rates can start at 10.5%, but weaker profiles can push that to 18% in 2026
- Processing fees run between 1% and 3% plus GST, which is notably steeper than gold loan charges
- Plan your exit carefully, as many lenders levy prepayment penalties if you close within the first 6 to 12 months
Gold Loan vs Personal Loan: One Could Cost You Your Gold, the Other Your Credit Score
Both loans can be used for urgent expenses such as medical emergencies or business needs. However, gold loans are usually faster and cheaper, while personal loans provide flexibility without risking an asset.
| Feature | Gold Loan | Personal Loan |
| Security | Secured by gold, usually 50 to 75 percent of the gold value | Unsecured, based on credit profile |
| Interest Rate (2026) | 8.5 percent to 12 percent per year | 10.5 percent to 18 percent per year |
| Loan Amount | Up to 75 percent of the gold value, average around Rs 5 lakh | Rs 1 lakh to Rs 50 lakh, depending on income |
| Tenure | 3 to 36 months | 12 to 60 months |
| Approval Time | Within hours, often the same day | 1 to 7 days |
| Eligibility | Minimal documents, no strict CIBIL requirement | CIBIL score 700 or above, salary around Rs 25,000 or more |
| Processing Fee | 0.25 percent to 1 percent plus GST | 1 percent to 3 percent plus GST |
| Taxes | Interest may be deductible under Section 37 for business use, no TDS if repaid on time | Interest not deductible for individuals, TDS applicable if interest exceeds Rs 5,000 per year |
| Risk | Gold may be auctioned if you default | Credit score damage, but no asset loss |
Gold loans usually cost less because they are secured.
Personal loans are better suited for those who do not have gold or who need a larger loan amount.
A gold loan or personal loan works best when your account is set up to handle repayments smoothly. Find out whether a savings account or a salary account is better suited for managing your EMIs and cash flow.
You should use online calculators to consider 2026 gold prices, which are above Rs 7,500 per gram, and check your repayment capacity before choosing.
What are the Advantages of a Gold Loan
- If you need money fast and have gold sitting idle, this is honestly one of the smartest ways to use it without actually selling it
- At rates starting from 8.5%, you are paying significantly less than what most unsecured lenders will ever offer you
- Your CIBIL score does not drive the decision here, which matters more than people realise when you are in a financial crunch
- You can structure repayment to suit your cash flow. Interest-only instalments keep your monthly burden low until you are ready to pay the principal
- Once you repay, your gold comes back to you, and most lenders will not charge you for closing early after the first three months
- With gold prices where they are in 2026, lenders are offering better LTV ratios and lower processing fees than we have seen in years
What are the Advantages of a Personal Loan
- Nothing is pledged, nothing is at risk, and you can use the money for virtually anything from a wedding to clearing high-cost debt
- If you have maintained a healthy credit profile, rates from 10.5% in 2026 are genuinely competitive for an unsecured product
- The longer tenure of up to 60 months gives you room to breathe on larger loan amounts without stretching your monthly budget too thin
- Every EMI you pay on time quietly works in your favour by pushing your CIBIL score higher, which opens better borrowing terms down the line
- Most banks and fintech lenders today offer end-to-end digital applications, so the paperwork burden is far lighter than it used to be
Looking for a personal loan app that keeps things simple? Get collateral-free loans with quick disbursal and zero hidden charges. Check your eligibility in minutes.
Gold Loan vs Personal Loan: Which is Better in 2026
Choose a gold loan if you have pure gold jewellery of 22 to 24 carats, need money urgently, and want lower interest costs. Choose a personal loan if you do not have gold to pledge, your CIBIL score is above 750, and you prefer not to provide collateral.
For example, if you take a Rs 2 lakh gold loan at 9.5 percent for 12 months, the total interest cost will be around Rs 16,500. In comparison, a personal loan at 13 percent for the same amount and tenure may cost around Rs 24,000 in interest. You should also consider tax benefits if the loan is used for business purposes, as gold loan interest may qualify for deductions.
You must compare interest rates for gold loans and unsecured personal loans from various providers.
When to Choose a Gold Loan
- You have gold jewellery.
- You need money urgently.
- Your credit score is low.
- You want lower interest rates.
Before you pledge your gold for a loan, find out whether holding it is actually working in your favour. Read our take on whether digital gold is a good or bad investment in 2026.
When to Choose a Personal Loan
- You do not have gold or assets to pledge.
- You have a good credit score.
- You need a larger loan amount.
- You want a longer repayment period.
In short, choose a gold loan if you have gold and want lower-cost borrowing. Choose a personal loan if you need flexibility and do not want to pledge any asset.
Gold Loan vs Personal Loan – FAQs
Yes. In 2026, most banks, NBFCs, and fintech platforms allow online applications for both gold loans and personal loans.
Public sector banks such as SBI and PNB generally offer gold loans starting around 8.25 percent to 8.75 percent for high purity gold. For personal loans, top banks may offer rates starting near 9.99 percent for applicants with excellent credit scores above 750.
Gold loans require you to pledge 18 to 24 carat gold jewellery, submit basic KYC documents, and meet minimum age criteria, which varies between 18 and 21 years depending on the lender. Personal loans require a stable income, a CIBIL score generally above 700, age between 21 and 60 years, and income proof such as salary slips or bank statements.
Gold loans are usually better for urgent cash needs because approval and disbursal can happen within hours. Personal loans may take one to seven days, depending on documentation and credit checks.
Gold loans usually have lower interest rates, around 7 to 15 percent per annum, because they are secured against gold. Personal loans are unsecured and therefore cost more, typically ranging from 10 to 26 percent or higher per annum.
