Personal Loan or Gold Loan: How Much EMI Would You Pay For Rs 5 Lakh loan?

Personal Loan or Gold Loan


Personal loans and gold loans are famous loan alternatives since they are easy to utilize. They all have their own functions and advantages. The equivalent monthly instalment (EMI) of any of your loans depends on the interest rate of the loan. About the interest rates, you may find that gold loans are less expensive than personal loans. The loan product you choose will depend on your borrowing requirements.

For gold loans, you can usually borrow 75% of the loan-to-value (LTV) ratio of gold as collateral. Before March 31, 2021, the government of India had briefly expanded the LTV of gold loans to 90%. Nonetheless, if there is a deficiency of gold and your loan necessities are higher, at that point a personal loan might be better for you.

Gold loans can be replaceable by personal loans. You can use gold loans wisely in many ways. It can assist you with raising assets to take care of some significant expense obligations, such as outstanding credit cards. You can use gold loans to raise funds for medical emergencies. It can likewise assist you with paying for some high costs, for example, your children’s schooling costs. If you run a business, you can consider over drafting the gold jewellery deposited in the bank. You only pay simple interest for the number of days used. Some people can regard this overdraft limit for gold as a good option to “establish an emergency fund.”

For example, it may be difficult for a salaried person to set aside money equivalent to a year’s expenses, but he can leave his gold jewellery in the bank and use the overdraft line to withdraw funds when needed. Subsequently, a gold loan can assist you with reinforcing your money related arrangement and give you comfort from numerous points of view. 

Both personal loan and gold loan have their advantages and disadvantages, which may benefit the individual or become a financial burden. These are some of the key factors for a personal loan and gold loan, and they will help you make an informed decision and get rid of the cash crunch.

What is Gold Loan?

A gold loan is a secured loan, and you should keep actual gold as adornments or as insurance for your capital necessities. For short-term funding needs, it is considered a good choice. The following are some of the main features of gold loans, which should be considered before determining whether this option is suitable for you.

Features of gold loans

A higher amount of loan: Gold loans usually provide a higher maximum loan limit than personal loans. Most banks and financial institutions provide personal loans of up to Rs 4,00,000, while gold loans provided by lending institutions are up to Rs 5000,000. If you have higher loan necessities, you can pick gold loans.Gold Loan lends 75% at LTV whereas You can also avail Cash for Gold which would be 99% around the actual value

No history of credit needed: With gold loans, you don’t need to stress over credit scores, because the bank won’t think about your credit history. Generally, you do not need to provide existing loans or debt obligations before obtaining a gold loan.

Low-interest rates: Generally, the interest rate of gold loans is lower than personal loans, which means that the cost of gold loans is lower than other loan types. Likewise, you should remove less money from your pocket to reimburse the loan.

Flexible repayment methods: Gold loans provide multiple repayment methods, but other types of loans do not. Here are the three most common repayment methods:

1. Regular EMI option or

2. Only repay the interest during the loan term and pay off the remaining interest at the end of the term or

3. Payment of interest and loan amount toward the finish of the term, no instalment before that

Personal Loan:

Personal loans are unsecured loans, entirely reasonable for satisfying short-dated financial commitments. Among many individuals, personal loans are considered to be a more common option to solve any urgent financial needs, especially in emergencies and large unplanned expenses. The following are some of the main characteristics of personal loans that should be considered before deciding whether to adopt this approach suits you.

Features of Personal Loan:

Unsecured: This is considered to be the biggest advantage of personal loans. Borrowers do not need to keep any assets as collateral when obtaining personal loans.

Quick payment: Most banks and financial organizations will credit the loan amount to the borrower’s account within 48 hours after the loan is endorsed. 

Services for various purposes: Individuals can utilize personal loans for different purposes, for example, weddings, house redesigns, instalment for new houses or abroad family travel.

Minimal administrative work: Personal loans don’t include confounded paperwork. You just need to give essential KYC documents and income declarations as needed by the bank.

Take a look at the most recent personal loan and gold loan interest rates by the best 15 banks in India. In addition, check the estimated EMI required to pay Rs.5 Lakh for a period of 3 years. EMI and Interest Rate on personal loans and gold loans on Rs.5 Lakh for 3 years:

Bank Personal Loan Gold Loan
Interest Rate EMI Interest Rate EMI
Union Bank of India 8.9 15,877 8.85 15,865
PNB 8.95 15,888 8.75 15,842
Central Bank 8.95 15,888 9.05 15,912
SBI 9.6 16,040 7.5 15,533
ICICI Bank 11.25 16,429 10 16,369

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