Cash woes? A personal loan to the rescue!

Personal Loan Vs Gold Loan

The gold jewellery you have collected could be used beyond aesthetic purposes. During a financial emergency, you could use the yellow metal for borrowing funds. Gold loans are mostly given out by pawn shops in Singapore. Banks in Singapore allow you to create an investment in gold, rather than offering a loan against gold. But how do gold loans fare when compared to personal loans? Let us find out.

Comparing Personal Loans and Gold Loans

Purpose of the Loan

Both the loans can be used for any purpose as you like, as long as you are repaying it with interest.

Regulatory Authority

You can take a personal loan from any bank or financial institution that is regulated by the Association of Banks in Singapore (ABS). On the other hand, gold loans are usually given out by pawn shops. Registered pawn shops are regulated by the Singapore Pawnbrokers’ Association.


Personal loans are unsecured and you do not need to provide a collateral for the amount you wish to borrow. Gold loans, as the name suggests, requires you to provide gold as a collateral.


Banks in Singapore usually offer personal loans ranging from 1 year to 5 years. On the other hand, gold loans from pawn shops come with a tenure of six months. If you fail to repay the amount within that period, the pawn shop could sell off your gold to recover their money.

Income Criteria

Most banks in Singapore have set an income limit for a loan. The bank will ask for a proof of your income to know whether you will be able to pay the amount back. Gold loan providers are not concerned about your income, because you are pledging your valuable possession with them. This kind of loan is useful if you are low on cash suddenly and payday is far away, if your income is below the limit set for a personal loan or if you don’t meet any other criteria for a personal loan.

Loan Amount

In case of personal loans, most Singaporean banks lend up to four times your monthly income. For a gold loan, the amount you can borrow depends on the market value of the gold.  

Interest Rates

Since personal loans do not require a collateral, the interest rates are usually high. Interest rates of personal loans in Singapore begin at around 8% (EIR). For gold loans, the interest rate is comparatively lower. It is as low as 1.50% p.a. for the first month. After the second month, this interest rate goes up every month.

Credit Score

When you take a personal loan, it will reflect in your credit report. Any single late payment can hurt your credit score. However, in case of gold loans from pawn shops, there are no credit checks. Also, if you default on the loan, the pawn shop will simply sell off your gold and there will no damage to your credit score.

Documents Required

The application process for a personal loan is to submit documents reflecting your identity and income. If you submit all the documents, most banks claim to approve your application within a day or two. For a gold loan, you need a proof of identity and the gold jewellery or bars.

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