Personal Loan vs Gold Loan vs FD Loan: Which Is Cheaper?

If you need money for a few months to a few years, a loan against FD is usually the cheapest option, a gold loan is usually next, and a personal loan usually costs the most, but needs no collateral. As of October 2026, FD loans typically cost 1% to 2% above your FD rate, bank gold loans start around 9%, and personal loans at major banks start near 10%. The right choice depends on what you own, how long you need the money and how much risk you can accept.

Quick comparison

Rates are indicative ranges from lender rate cards and RBI rules as of October 2026. Your offer depends on your profile and the lender. The RBI raised the repo rate to 5.50% on 7 October 2026, so floating rates may move up.

Personal loan: no collateral, highest cost

A personal loan is unsecured, so the lender relies entirely on your income and credit history.

• Rates: Major banks such as SBI, HDFC Bank and ICICI Bank publish starting rates near 10%, with upper ends between about 15% and 24%. NBFCs and app lenders can charge more. See our personal loan interest rates guide.
• Fees: Processing fees plus 18% GST are deducted upfront, raising the effective cost.
• Prepayment: Many personal loans are fixed-rate, so foreclosure charges may apply. Check the Key Facts Statement (KFS), which lenders must give you before you sign.
• Best for: Salaried borrowers with good credit who have no FD or gold to pledge, or who do not want to risk family jewellery.

Gold loan: cheap and fast, but your jewellery is at stake

Gold loans are secured by your jewellery, so lenders care less about your credit score.

• Rates: As of October 2026, SBI's gold loan schemes were quoted from about 8.70% to just under 10% depending on the scheme. NBFC gold loan rates vary widely, from around 9% to well above 20%.
• Loan-to-value: Under RBI's Lending Against Gold and Silver Collateral Directions, 2025, effective for lenders from 1 April 2026, consumption loans can be up to 85% of the gold's value for loans up to ₹2.5 lakh, 80% for ₹2.5 lakh to ₹5 lakh, and 75% above ₹5 lakh.
• Bullet repayment: You can pay principal and interest at the end, but bullet consumption loans are limited to 12 months under the RBI rules.
• Return of gold: Lenders must return your gold within seven working days of full repayment, or pay ₹5,000 for each day of delay caused by them.
• Auction risk: If you do not repay, the lender can auction the gold after notice, at a reserve price of at least 90% of its current value.

Read the full rules in our gold loan guide.

Loan against FD: usually the cheapest

You pledge your FD, and the bank lends you a share of it, often as an overdraft.

• Rates: Usually 1% to 2% above the FD's own rate. If your FD earns 6.5%, the loan might cost 7.5% to 8.5%.
• Amount: Typically 75% to 90% of the deposit, only up to the FD's maturity date.
• Overdraft benefit: In an overdraft you pay interest only on the amount used and the days used.
• No market risk: An FD's value does not fall, so there are no margin calls.
• The catch: You must already have an FD, and if you do not repay, the bank adjusts the FD against your dues.

Compare it with breaking the deposit in our guide on loans against FDs and mutual funds.

Worked example: borrowing ₹2 lakh for 12 months

Illustrative. Assume you repay each loan in 12 equal monthly instalments. Rates and fees are assumptions within the ranges above.

How the EMI is worked out: EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1). For the personal loan, P = ₹2,00,000, r = 12% ÷ 12 = 1% a month, n = 12. (1.01)^12 = 1.126825, so EMI = 2,00,000 × 0.01 × 1.126825 ÷ 0.126825 = ₹17,770. Total paid is ₹17,770 × 12 ≈ ₹2,13,237, so interest is ₹13,237. Try your own numbers in our EMI calculator.

In this example, the FD loan costs less than half the personal loan. Your FD also keeps earning 6.5% throughout, so the true cost of the FD loan is the 1% spread on the amount borrowed, plus the interest you would have lost by breaking the FD instead.

Watch the bullet option on gold loans

If you choose a 12-month bullet gold loan at 9% instead of EMIs, you pay interest on the full ₹2 lakh for the whole year: about ₹18,000 (more if interest compounds). That is higher than the EMI scheme's ₹10,998 because the principal never reduces. Bullet repayment helps cash flow, not cost.

Which one should you choose?

1. You have an FD you do not need to break: Start with a loan or overdraft against it. It is usually the cheapest and quickest.
2. You have gold, need money fast or have a low credit score: A bank gold loan is often next best. Prefer EMI schemes if you can afford them, and borrow only what you are confident of repaying within the term.
3. You have neither, or cannot risk family jewellery: A personal loan is the fallback. Compare offers by APR, not headline rate. If your score is weak, see our guide on loans with a low CIBIL score.
4. The need is long-term (over 2 to 3 years): Consider whether breaking the FD, or a longer secured loan, is cheaper than paying a spread for years.

Mistakes to avoid

• Comparing only interest rates and ignoring processing fees and GST.
• Taking a bullet gold loan without a clear plan to repay the lump sum.
• Pledging gold with an unregulated pawnbroker instead of a bank or RBI-regulated NBFC.
• Taking a personal loan to invest or speculate.
• Missing payments on any of these loans; all are reported to credit bureaus.

Key takeaways

• A loan against FD is usually the cheapest, at about 1% to 2% above the FD rate, with low or no fees.
• Bank gold loans started around 8.70% to 10% as of October 2026, but your jewellery is at risk if you default.
• Personal loans need no collateral but cost the most, from about 10% at major banks plus fees.
• In the illustrative ₹2 lakh, 12-month example, total cost ranged from ₹8,218 (FD loan) to ₹17,957 (personal loan).
• Always compare the full cost in the Key Facts Statement, including fees and GST.