Gold Loan vs Personal Loan: Whenever people are in urgent need of money, two options come first in mind Gold Loan and Personal Loan. Both give quick funds, but the real question is, which one is lighter on your pocket if you need ₹5 lakh? Let’s understand this with simple words and real numbers.
Why People Choose Between the Two
In India, gold is not just jewelry it’s security for tough times. Many families prefer pledging gold rather than going through the long process of a personal loan. On the other hand, personal loans don’t require collateral, which means you don’t have to mortgage anything. But yes, the interest rates usually differ a lot. That’s why choosing smartly can save you thousands.
Read more: Loan Restructure 2025: What If You Can’t Pay EMI on Time? Here’s How Banks Help
Interest Rates in 2025
Currently, gold loans are available at 9% to 11% annual interest, depending on the bank or NBFC. Personal loans, on the other hand, usually start from 11% and can go up to 16% or more, depending on your CIBIL score and income. This small percentage difference makes a big impact on your EMI and total payment.
Calculation for ₹5 Lakh Loan
| Loan Type | Loan Amount | Interest Rate | Tenure | EMI (Approx) | Total Interest | Total Payment |
|---|---|---|---|---|---|---|
| Gold Loan | ₹5,00,000 | 10% | 3 Years | ₹16,134 | ₹80,824 | ₹5,80,824 |
| Personal Loan | ₹5,00,000 | 13% | 3 Years | ₹16,871 | ₹1,07,356 | ₹6,07,356 |
From this table, you can clearly see that the Gold Loan EMI is cheaper and the total interest you pay is also much less compared to a personal loan.
Real-Life Example
Think about a small business owner who suddenly needs ₹5 lakh for stock. If he goes for a gold loan, his EMI is lighter, and he pays less interest overall. But if someone doesn’t want to risk pledging gold, then a personal loan is still a safe choice, even if it costs a little more.
Which One Should You Pick?
If you have gold lying idle and you are confident about repayment, a gold loan can save you money. But if you don’t want to mortgage your assets and prefer an unsecured option, then personal loan works fine, though it will cost you extra interest. In short, the decision depends on how quickly you need the loan and how comfortable you are with pledging gold.
Conclusion
For ₹5 lakh, a gold loan clearly comes out cheaper than a personal loan, both in EMI and total interest paid. Still, the final choice depends on your situation. If you have gold and want to save money, go for a gold loan. If you prefer no collateral and more flexibility, personal loan is the option. What matters most is timely repayment, because that saves you from penalties and builds your credit score.
Disclaimer
This article is only for educational and general knowledge purposes. Interest rates vary by bank and can change anytime. Please confirm the latest details and terms with the official bank or NBFC before making any financial decision.
