Securing your future: Gold loans vs. Unsecured loans

A gold loan is a type of secured loan where the borrower pledges their gold ornaments or jewellery as collateral to the lender in exchange for a loan amount. Gold loans are popular in India, where gold is highly valued and often used as a form of savings. These loans offer many benefits, including lower interest rates and easier approval processes than other forms of unsecured loans. 

When it comes to a gold loan, the borrower pledges their gold ornaments or jewellery to the lender as collateral. The lender appraises the gold and provides a loan amount proportionate to the gold value. Generally, the loan-to-value (LTV) ratio for gold loans is up to 75% of the gold value offered as collateral. Lenders offer lower interest rates, as the loan is secured by the gold collateral, which reduces their risk. The interest rates can be between 7% to 20% depending on the lender, loan amount, and tenure. 

Now let’s understand how a gold loan differs from other loan types like personal loan, business loan or home loan. While a personal loan is an unsecured loan, a gold loan is a secured loan. This means that a personal loan does not require any collateral to be pledged, whereas, a gold loan requires gold jewellery to be pledged as collateral. Similarly, in the case of business loan or home loan, the loan is provided against the property or assets of the business/homeowner. But in the case of a gold loan, it is the gold which acts as collateral. 

Another key advantage of a gold loan is its quick disbursal process. A gold loan can be availed within hours of applying for the same, whereas, securing a personal loan or a business loan may take longer as detailed background checks and other formalities come into play. 

Lastly, it is important to note that gold loans are an attractive option for those who need immediate cash for emergencies or those who do not qualify for other types of loans due to low credit score or unsteady income. Furthermore, gold loans are gaining popularity during the current pandemic situation as people are experiencing financial hardships due to job loss or pay cuts. 

Gold loans and unsecured loans are two financing options available to individuals who need funds. Gold loans are a secured loan type where the borrower pledges their gold ornaments as collateral, while unsecured loans are not backed by collateral. In this article, we will discuss the benefits of gold loans compared to unsecured loans. 

Benefits of Gold Loans over Unsecured Loans 

1. Lower Interest Rates: One of the significant advantages of gold loans is that they offer lower interest rates than unsecured loans. Gold loans are backed by collateral, which means that the lender has reduced risk. Hence, the interest rates on gold loans are lower than that of unsecured loans, which are perceived as riskier. 

2. No credit score verification: Unlike unsecured loans where the borrower’s credit score is a major consideration, gold loans do not have an impact on the credit score. As gold loans are backed by collateral, lenders offer loans without evaluating the borrower’s credit history. This makes gold loans a feasible financial option for those with a poor credit score. 

3. Quick Disbursal and Approval: Gold loans have a faster approval process than unsecured loans. As the lender evaluates the gold’s value and purity, they can disburse the loan amount within a few hours, making gold loans a viable option for individuals who need funds quickly. 

4. Flexible Repayment Tenure: Gold loans have more flexible repayment tenure compared to unsecured loans. Borrowers have the option to choose a loan tenure that meets their repayment capability, making it easier for them to repay the loan amount. 

Eligibility Criteria for Gold Loans 

To avail a gold loan, the borrower must meet the following eligibility criteria: 

– The borrower must be an Indian citizen and above 18 years of age. 

– The borrower should have gold jewellery or ornaments that can be pledged as collateral. 

– The purity of the gold ornament should be at least 18 karats. 

– Lenders may request additional documentation such as proof of address and income to evaluate the borrower’s repayment capability. 

Best apps to avail gold loans in India 

Mobile apps offered by financial institutions facilitate a simple and quick way to obtain a gold loan. Here are some of the best apps available in India to avail a gold loan: 

1. Bajaj Finserv App: The Bajaj Finserv app is well-known for gold loans. Borrowers can track their loan application status, and repayment schedules, and get pre-approved loan offers for gold loans. The app ensures faster disbursal of the loan amount and minimal documentation. 

2. Rupeek: Rupeek is another highly-rated gold loan app in India. Borrowers can access up to 75% of the gold’s value as a loan amount. The app provides gold valuation done by an expert, disbursal of funds within 30 minutes, and doorstep service. 

3. Muthoot Fincorp: The Muthoot Fincorp app simplifies the loan application process and provides customised repayment tenures. Borrowers can also avail of doorstep services, where the company’s representative visits the borrower’s location for gold valuation and loan disbursal. 

Difference between Gold Loans and Unsecured Loans 

Gold loans are a secured loan type, while unsecured loans are not backed by collateral. Lenders offer lower interest rates for gold loans as they are backed by collateral, whereas unsecured loans’ interest rates are higher due to the relative risk the lender takes. 

Gold loans do not require a credit score verification while unsecured loans require a good credit score. However, if the borrower defaults on a gold loan, they can lose their gold ornaments or jewellery that were pledged to the lender. Unsecured loans do not have a collateral obligation, which makes defaulting less risky. 


Gold loans offer several benefits over unsecured loans, making them a viable funding option for individuals who require quick access to funds, have poor credit scores and require a lower interest rate option. The eligibility criteria for gold loans are minimal and can be easily accessed through mobile apps like Bajaj Finserv, Rupeek, and Muthoot Fincorp. Borrowers must evaluate their repayment capacity and schoose the best app to avail of a gold loan based on their location and requirements.

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