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📚 Guide 💳 Borrowing Updated2026-08-07

Personal loan vs credit card vs gold loan

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Quick answer

Borrow ₹1,00,000 and clear it over 12 months: a gold loan costs about ₹7,238, a personal loan ₹10,105, a card balance converted to EMI ₹10,647, and revolving on the card about ₹24,181. Same money, same year, ₹16,943 apart. Revolving is roughly 3.3x the cheapest route, so never let a card balance simply roll.

What ₹1,00,000 for one year actually costs

Lenders quote rates in incompatible units, which is most of the confusion. A personal loan is sold as an annual reducing rate, a card as a percentage per month, a gold loan as an annual rate but often on an interest-only structure. So the table below forces all four onto identical terms: ₹1,00,000 borrowed, repaid in 12 equal monthly instalments, interest charged on the reducing balance, plus the upfront processing fee with 18% GST on top. The final column is the true APR, solved by IRR, which folds that fee back into the rate so you can compare the deals rather than the advertisements.

Route Rate Fee + GST Interest (12 mo) Total cost True APR
🪙 Gold loan 11% ₹1,180 ₹6,058 ₹7,238 13.26%
🏦 Personal loan 14% ₹2,360 ₹7,745 ₹10,105 18.58%
🧾 Card balance converted to EMI 16% ₹1,770 ₹8,877 ₹10,647 19.44%
💳 Credit card, revolved 42% nil ₹24,181 ₹24,181 42.00%

₹1,00,000 repaid in 12 equal monthly instalments on a reducing balance. Fees shown include 18% GST. True APR solved by IRR on cash actually received. Rates are representative mid-band figures for FY 2025-26: gold 9% to 12% at banks, personal loan 10.5% to 24%, card EMI conversion 13% to 18%, card finance charge 3.5% per month. Your own rate depends on lender, credit score and income. Not financial advice.

The minimum-due trap, and picking the right route

The ₹24,181 revolving figure above assumes something quite disciplined: that you clear the whole balance inside twelve months. Most people do not. Pay only the minimum due, typically 5% of the outstanding with a ₹200 floor, and the arithmetic turns brutal. The balance grows 3.5% a month while your payment removes 5% of it, so the debt shrinks by less than 2% a month. Starting from ₹1,00,000, that takes about 226 months to clear, roughly 19 years, and costs around ₹2,03,573 in interest: over 2.0 times the amount you borrowed. The minimum due keeps your account current, it does not repay your debt.

Choosing between the rest is mostly about what you can pledge and how fast you need the money. A gold loan wins on price (13.26% APR here) and barely looks at your credit score or income proof, but the lender caps the advance at 75% of the gold's value and can auction the jewellery if you default. A personal loan at 18.58% APR needs a decent score and a few days, yet asks for no collateral and gives a fixed end date, which is usually the right default for a planned expense. Card EMI conversion at 19.44% APR is the fast fix for a balance already sitting on your statement: it costs about ₹542 more than a personal loan over the year, but you can do it in minutes, and it beats revolving by roughly ₹13,534. Watch the flat-rate quote too, because a lender advertising a low "flat" rate is quoting something close to double in real terms, as our guide on flat vs reducing interest shows.

❓ FAQ

Common questions.

Which is cheapest: a personal loan, a credit card, or a gold loan?
On ₹1,00,000 cleared over 12 months, the gold loan is cheapest at about ₹7,238 all-in, then the personal loan at ₹10,105, then converting a card balance to EMI at ₹10,647. Revolving on the card is far and away the worst at roughly ₹24,181, about 3.3 times the gold loan and ₹16,943 more in cash. The ordering follows the security: a gold loan is backed by jewellery the lender can sell, so it is priced lowest, while card revolving is unsecured, instant, and priced accordingly.
Why is credit card interest so much higher than a loan?
A card is an unsecured, pre-approved, revolving line you can draw on at any moment with no fresh underwriting, and issuers price that convenience plus the default risk into a monthly rate rather than an annual one. At 3.5% a month the nominal rate is 42% a year, but because the charge compounds monthly the effective annual rate is about 51.1%. Two extra traps make it worse than the headline: the moment you carry any balance you lose the interest-free grace period, so new purchases start accruing from the day you make them, and a cash withdrawal on the card attracts interest from day one plus a withdrawal fee of around 2.5%.
What happens if I only pay the minimum due on my credit card?
You stay in debt for decades. Paying just 5% of the outstanding each month (with the usual ₹200 floor) on a ₹1,00,000 balance at 3.5% a month takes roughly 226 months, about 19 years, and costs around ₹2,03,573 in interest, more than 2.0 times what you borrowed. The reason is arithmetic: the balance grows 3.5% while your payment removes only 5%, so the balance falls by under 2% a month. The minimum due is designed to keep your account current, not to clear your debt. Always pay the statement balance in full, and if you cannot, convert it to an EMI before the due date.
Is a gold loan risky? What is the LTV limit?
The risk is real but specific: your jewellery is collateral, so if you default the lender can auction it, and you lose an asset that may matter to you far beyond its resale value. Lenders also cap how much they will advance against the metal, an LTV limit of 75% of the gold's value, so ₹1,00,000 of gold typically supports about ₹75,000 of loan. If gold prices fall sharply mid-tenure some lenders ask for a top-up. Against that, gold loans are quick (often same day), need almost no income proof, and do not hinge on your credit score, which is exactly why the rate is the lowest of the four routes here.
Should I convert my credit card balance into an EMI?
Yes, if you already have a balance you cannot clear this month. Converting the ₹1,00,000 to a 16% EMI costs about ₹10,647 over the year against roughly ₹24,181 for revolving, so the conversion saves around ₹13,534. Do it before the payment due date, check the one-time conversion fee (typically 1% to 2% plus GST), and confirm whether the converted amount still blocks your credit limit. Two caveats: pre-closing an EMI conversion often carries a foreclosure charge, and a fresh personal loan at 14% would still be cheaper (about ₹542 less) if you have the few days it takes to get one approved.
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