Gold Loan vs Personal Loan: Interest, Eligibility, EMI and Repayment Compared

• Gold purity
• Weight of eligible gold
• Valuation of the gold
• Loan-to-value ratio
• Borrower's identity and documentation
• Lender-specific conditions

Unlike a personal loan, a high salary may not be the primary factor determining the maximum gold loan amount.

For example, someone owning eligible gold may be able to access a secured loan even if their income does not qualify them for the same amount through an unsecured personal loan.

However, lenders may still have repayment and documentation requirements.

Personal Loan Eligibility

Personal loan eligibility is generally determined by the borrower's financial profile.

Lenders may consider:

• Monthly income
• Employment stability
• Credit score and credit history
• Existing debt
• Age
• Loan tenure
• Repayment capacity

A person with a stable income and suitable credit profile may qualify without pledging an asset.

However, approval and loan amount are always subject to the lender's eligibility criteria.

Gold Loan EMI vs Personal Loan EMI

The way repayment works can differ between the two products.

A gold loan EMI may be structured differently depending on the lender. Some gold loan products may allow regular principal-and-interest EMIs, while others may have alternative repayment structures.

A personal loan EMI is commonly calculated using the principal, interest rate and repayment tenure.

For a standard reducing-balance loan, the formula is:

EMI = P × R × (1 + R)ⁿ ÷ [(1 + R)ⁿ − 1]

Where:

• P = Principal loan amount
• R = Monthly interest rate
• N = Number of monthly instalments

For example, an illustrative ₹2 lakh loan at 14% annual interest for 24 months would have an estimated EMI of approximately ₹9,603 under a standard reducing-balance calculation.

Actual EMI depends on the rate and loan terms.

Gold Loan vs Personal Loan: Example

Suppose you need ₹2 lakh.

Option 1: Gold Loan

You have eligible gold that can be pledged as collateral. The lender evaluates the gold and offers a loan based on its applicable LTV ratio and terms.