Loan Against FD or Gold Loan – Which One To Choose?

When there is an urgent need for funds, a person can choose between a secured and an unsecured loan. Read to know the difference between gold loan and loan against FD and choose accordingly.

13 Jan,2023 11:49 IST 2095 Views
Loan Against FD or Gold Loan – Which One To Choose?

A person can choose to take a secured or an unsecured loan when there is an urgent need for funds. A loan that is mortgaged against an asset is usually a preferred medium as the cost of borrowing is lower and availability is easier.

Among the many forms of secured borrowings are loans against fixed deposits, or FD, and gold loans. Both loans have certain advantages and a few limitations. Let us look at them individually to decide what to choose.

Loan Against Fixed Deposit

If you have fixed deposits and need cash urgently, the first urge is to break the FD. This, however, may not always be the best option as a premature closing of fixed deposit brings down the interest rate that you may have locked in initially. Also, you may need only part of the total fixed deposit and not the full amount. In such cases, you can choose to take a loan against fixed deposit.

Typically, you can get up to 90% of the fixed deposit amount as loan and the interest rate may be only slightly higher than what your FD may be earning. Also, you will have to ensure that the loan is repaid fully before the maturity period of the fixed deposit.

Being a secured loan, the documentation is usually low and the threshold for the CIBIL or credit score may also not be high, as is typically the case with unsecured loans.

Gold Loans

A gold loan is money taken by mortgaging gold jewellery or coins. The gold remains pledged with the lender for the period of the loan. The pledge is released and the borrower can get their gold back once the entire principal amount and interest has been paid.

When physical gold is stored at home or in a bank locker, it does not earn interest. Individuals and families can monetize their gold and use it to cover unforeseen expenses by applying for a gold loan.

Moreover, if the value of gold rises during the period of the loan, the borrower can sell the gold after the loan has been repaid, and gain on the price escalation of the yellow metal.

It is quick and simple to apply for gold loans. When the gold jewellery's purity is confirmed, little paperwork is required, and the loan is swiftly paid to the borrower's account. Additionally, the borrower's credit history is not necessary as long as the gold's purity has been determined. Even if a borrower has a bad credit history and a low CIBIL score, they may still be eligible for a gold loan.

The lenders of gold loans permit the borrowers to pay only the interest amount during the loan's term and the principal amount at its conclusion. This is different from standard personal loans or collateralized loans, where a portion of the principal and interest must be paid with each installment. The interest rate on gold loan is also typically lower than personal loans.


The most important aspect to consider when deciding on whether to take out a loan against FDs or to go for a gold loan is the asset that you have and the value of that asset.

The loan is typically given for up to 90% of the pledged gold’s value or the total fixed deposit amount. Also, remember that in case you are not able to pay back the loan the asset will be forfeited. Also, do check the interest rate that each loan will carry before finalising the deal.

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