Secured or Unsecured loan: Which one to choose?

June 27, 2025

Secured or Unsecured Loan: Which One to Choose?

When you need extra cash—whether for home renovations, a dream vacation, or unexpected expenses—a personal loan can be your go-to solution. At Nitstone Finserv, we help you weigh the two main types of personal loans—secured and unsecured—so you can decide with confidence. We’ll even explain how a gold loan fits into the picture.

What Is a Secured Personal Loan?

A secured personal loan requires collateral—an asset you own that the lender can claim if you default. Common collateral includes:

Property (home or commercial)
Vehicle (car or two-wheeler)
Fixed Deposit (FD with the lender)
Gold – this is known as a gold loan, where you pledge your jewellery or coins

Key Benefits of Secured Loans

Lower Interest Rates: Collateral reduces lender risk, so rates often fall within the 8–12% per annum range.
Higher Loan Amounts: You can borrow up to 80–90% of your collateral’s market value.
Longer Tenures: Tenures can extend up to 10–15 years, reducing your monthly EMI.

Drawback

Asset Risk: Missing EMIs can result in the seizure of your pledged asset.

What Is an Unsecured Personal Loan?

An unsecured personal loan doesn’t require collateral. Approval and loan amount depends on your:

CIBIL score
Income stability
Employment history
Debt-to-income ratio

Key Benefits of Unsecured Loans

Fast Disbursal: Minimal documentation means funds can arrive in 24–48 hours—perfect for emergencies.
No Asset at Risk: Your home, car, or gold remains safe, even if you default (though your credit score will suffer).
Flexibility: Use it for any purpose—wedding expenses, medical bills, debt consolidation, or a family vacation.

Drawbacks

Higher Interest Rates: Typically 12–24% p.a., reflecting the lender’s higher risk.
Lower Loan Amounts: Often capped at 10–20× your monthly income.

Where Does a Gold Loan Fit?

A gold loan is a type of secured personal loan specifically backed by gold. You pledge your jewellery or coins, and in return get quick funds at rates lower than unsecured loans but slightly higher than other secured loans:

Interest Rates: Around 10–14% p.a.
Tenures: Usually 6 months to 3 years
Loan Amount: Up to 75–85% of gold’s market value

If you own household gold and need cash fast, a gold loan can be more affordable than an unsecured personal loan and faster than mortgages or FDs.

Quick Comparison

Feature

Secured Loan (incl. Gold Loan)

Unsecured Personal Loan

Collateral

Required (home, vehicle, FD, gold)

Not required

Interest Rate

Lower (8–14% p.a.)

Higher (12–24% p.a.)

Loan Size

Larger (up to collateral value)

Moderate (income-based cap)

Processing Time

3–7 days (asset verification)

1–2 days

Asset Risk

Yes (seizure upon default)

No (but credit hit; legal action possible)

Which Personal Loan Should You Choose?

Go for a Secured Loan (or Gold Loan) If:

You Need a Large Sum (>₹5 lakhs): Collateral → higher limits.
You Have Valuable Assets: Gold, property, or a car to pledge.
You Want Lower EMIs: Longer tenure eases the monthly outflow.
Your Credit Score Is Low: Collateral compensates for a weaker CIBIL.

Go for an Unsecured Personal Loan If:

You Need Quick Cash: Emergencies demand speed—no collateral delays.
You Have No Collateral: Or prefer not to risk your assets.
Your Credit Score Is Strong: You can still land decent rates.
You Need a Moderate Amount (<₹5 lakhs): Income-based cap is enough.

Decision-Making Checklist

Question: If “Yes,” Consider…

Do I need >₹5 lakhs? Secured loan (or gold loan)
Is my CIBIL score <700? Secured loan
Do I want EMIs <₹10,000/month? Secured loan
Do I need funds within 48 hours? Unsecured loan
Do I lack collateral? Unsecured loan
Is my CIBIL ≥700? Unsecured loan

Why Choose Nitstone Finserv?

Tailored Solutions: We compare secured, gold, and unsecured personal loan options against your profile.
Transparent Pricing: Clear rates, fees, and EMI schedules—no surprises.
Quick Processing: Our digital platform accelerates both unsecured disbursals and gold loan approvals.
Flexible Repayment: EMI holidays, part-prepayment options, and top-ups keep you in control.

FAQs

1. Is a gold loan considered a personal loan?

Yes, a gold loan is a type of secured personal loan. You pledge your gold as collateral and get a loan amount based on its market value. It’s ideal for short-term cash needs and usually comes with lower interest rates compared to unsecured personal loans.

2. Which loan type is better if I have a low CIBIL score?

If your CIBIL score is below 700, a secured loan (including a gold loan) is a better option. Lenders are more likely to approve loans with collateral, even if your credit score is low, whereas unsecured loans rely heavily on creditworthiness.

3. Can I use a personal loan for any purpose?

Yes, both secured and unsecured personal loans from Nitstone Finserv can be used for a wide range of purposes—medical expenses, travel, education, home repairs, or even debt consolidation. Just ensure you choose the right loan type based on your financial needs and repayment ability.