Which is better: a gold loan or an education loan?


In every new stage of your life, you need money. Be it for education, weddings, for your child’s education, a medical emergency in the family, buying a house, or a dream holiday with your spouse, you need funds. 

The most preferred way of arranging cash inflows is through loans. The financial market offers various debt products to the customers, and it may get confusing to decide on the most suitable option while arranging funds through a loan.

Two very common loan options that people use are gold loans and education loans. 

If you are not sure which loan option of the two you should avail of, read on to get a better understanding of the two.

Difference between a Gold Loan and an Education Loan

Understanding the differences between a gold loan and an education loan will help you decide which one suits your requirements the best. Below are the key differentiating factors between the two types of loans.

  • Nature of loan: A gold loan is a secured loan where the customer deposits his gold valuables with the lender as collateral. It gives confidence to the lender, and he generally provides the customer with a quicker loan at easy terms.

On the other hand, an education loan is generally an unsecured loan, and the borrower does not have to provide any asset as a security to avail of it. While this may seem to be an advantage on the surface, the borrower has to pay a higher interest rate for such a loan.

  • Rate of interest: The rate of interest chargeable on a loan is usually the key deciding factor between different loan options. Since gold loans are secured loans, the gold loan interest rate is much flexible with variety of repayment options. 
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The education loan interest rate can go significantly high depending on the borrower’s financial condition and repaying capacity. Additionally, education loans have a floating interest rate, and there is always a possibility that they may shoot up at any time during the loan tenure. 

  • Eligibility criteria: Every loan comes with eligibility criteria that the loan applicant must meet to get his loan approved. The eligibility criteria of a gold loan are very lenient, and most customers manage to easily meet the loan requirements. To get a Muthoot FinCorp gold loan, the loan applicant should be more than 18 years old when applying for the loan and less than 65 years by the time the loan tenure completes. Loan applicants can pledge their gold ornaments with a purity of 18 to 24 karat and get a loan of up to Rs. 50 lakhs.

The eligibility criteria for an education loan are quite difficult to meet. Most lenders offer an education loan only to students who manage to secure admission to well-recognised colleges and universities. 

  • End-use: There is no restriction on the end-use of the gold loan amount, and the customer can use it as per his requirement. If a student is going abroad or to a far-away city for higher education, his expenses would go beyond the college fees. By taking a gold loan, he can cover a variety of other expenses including expenses on air tickets, accommodation, books, laptops, etc. 

An education loan does not cover travel or lodging expenses and they have to be borne by the customer. 

  • Requirement of a guarantor: Since gold loans are secured loans and the lender has the customer’s gold in his custody, gold loans do not require a guarantor, making them easy to avail.
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Generally, education loans do not require a guarantor, and It makes getting education loans tougher. 

Most lenders do not allow the student to change his course or college after sanctioning an education loan. It may restrict the student from switching over to a better college or a course of his choice and restrict his career options. A loan against gold does not put any such restrictions on the student. Anyone with gold ornaments can avail of a gold loan from a trusted name like Muthoot FinCorp to fund their child’s education for a better future. 



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