Personal loan vs gold loan vs overdraft: which Nepali debt is cheapest in 2026

A reader emailed last month asking which to use for his daughter's medical procedure: personal loan, gold loan, or overdraft. The procedure was three weeks out, cost about रू 6,00,000. In his inbox sat a Bajaj-finance pre-approval at 16%. He also had two tola of family gold and an FD of रू 8,00,000 with two years left to run. Technically all three options worked. Before he had even opened the fine print, the price gap between them was around रू 35,000 a year.

What follows is the side-by-side that most comparison websites skip. Headline rates, yes, but also how interest actually accrues on each product, which fees the brochures bury, and which option fits which borrowing shape. The arithmetic is mostly straightforward. The trap is picking the wrong product for the wrong need.

The three products, defined narrowly

People use the words "loan" and "overdraft" interchangeably. The bank does not. They are three separate products with different mechanics:

Personal loan. Unsecured (or lightly secured by guarantor), disbursed as a lump sum, repaid in fixed monthly EMIs over 1–7 years. Interest accrues on the outstanding principal balance, which means on day 1 you pay interest on the full disbursement even if you only spend half. Available at most commercial banks for salaried professionals: doctors, engineers, payroll customers, chartered accountants. Standard Chartered explicitly limits to those categories with a maximum of NPR 1.5 million over up to 5 years.

Gold loan. Secured by physical gold pledged at the branch. Tenure typically 1 year, renewable. Two repayment shapes are offered: demand loan (lump-sum interest + principal) or overdraft-style (interest only, principal due at maturity, redraw permitted). LTV runs up to 70% on ornaments and 80% on coins/bars. Per-borrower limits at banks like Kamana Sewa Bikash Bank are NPR 25,000–15,00,000 individual, up to NPR 25,00,000 institutional.

Overdraft (OD). A pre-approved limit attached to your current or savings account. You draw any amount up to the limit on demand. Interest accrues daily on the drawn balance only; the part of the limit you haven't used costs nothing, or sometimes a small commitment fee. Two flavours:

• Personal/clean OD. Unsecured, based on income and credit profile. Limits up to roughly 10× monthly net salary at most commercial banks.
• Secured OD. Backed by FD, gold, or property. Cheaper, larger limits, faster disbursal because the security is already with the bank.

The 2026 rate scorecard

Snapshot from BankByaj as of late April 2026, with comparable products grouped:

Personal loans / personal overdrafts at commercial banks (the BankByaj product label varies; in practice the bank's actual product is mostly an overdraft against personal income):

Bank	Product	Rate range
Agricultural Development Bank	Personal	5.06% – 10.06%
Prime Commercial Bank	Personal	5.42% – 10.42%
Excel Bikas Bank	Personal	5.80% – 9.80%
Himalayan Bank	Secured Premier	5.99% – 7.99%
Nepal SBI Bank	Personal Overdraft	5.99% – 8.49%
Nabil Bank	Personal Overdraft	6.15% – 8.15%
NIC Asia	5-year personal	6.50% – 8.50%
NMB Bank	Personal Overdraft	7.77% – 9.77%
Standard Chartered	Personal (fixed, 5yr)	8.90% – 9.40%
Goodwill Finance	Personal	7.24% – 11.24%
Best Finance	Personal	8.89% – 13.89%

The bottom of the table is mostly finance companies and microfinance, where rates push past 14% and operational costs are higher. The top of the table, banks at 5–7%, usually requires either salaried-professional status, an existing relationship, or a secured product dressed up as a personal one.

Gold loans. Less standardised public data. Typical 2026 commercial bank pricing:

• Headline: 9–12% per annum, paid monthly or quarterly.
• LTV: 70% ornaments, 80% bars/coins.
• Tenure: 1 year, renewable.
• Processing: 0.5–1% of loan amount, plus appraisal fees of NPR 100–500.

Loan against fixed deposit (LAFD). The cheapest legitimate option:

• NIC Asia: 90% of FD or NPR 2,00,000 (whichever is lower) for instant mobile-disbursed loans; larger amounts at branch.
• NIMB: coupon rate + premium up to 3%.
• Kamana Sewa Bikash Bank: coupon + 2% or base rate + 2%, whichever is higher; 90% LTV funded, 100% non-funded.
• Tenure: up to 1 year or FD maturity.
• Effective cost: if your FD pays 6% and the LAFD margin is 2%, your net cost of borrowing is the 2% margin. The FD keeps earning its coupon, and you only pay the spread on the drawn amount.

How the numbers actually compare on a रू 5,00,000 borrowing

Worked example. You need रू 5,00,000 for one year. You hold ornaments worth रू 8,00,000, an FD of रू 6,00,000 at 6%, and a clean salary of रू 1,20,000/month. All four products are open to you. Compare the all-in cost.

Option A — Personal loan, 12% for 1 year, 1% processing fee, structured EMI.

• Processing fee: रू 5,000.
• Interest on declining balance over 12 months: ~रू 33,000.
• Loan insurance (if bundled, optional): ~रू 5,000.
• Total cost: ~रू 43,000.

Option B — Personal overdraft, 8.5% on outstanding, 0.5% commitment fee, fully drawn day 1.

• Commitment fee on full limit: रू 2,500.
• Interest on full balance for 12 months: ~रू 42,500.
• Total cost: ~रू 45,000.
  • Caveat: if you only need रू 5,00,000 outstanding for 6 months on average (drawing and repaying as cashflow allows), the interest drops to ~रू 21,000, and total cost falls to रू 23,500.

Option C — Gold loan, 10.5% for 1 year, 1% processing, demand-loan style.

• Processing + appraisal: ~रू 5,500.
• Interest for 12 months: ~रू 52,500.
• Total cost: ~रू 58,000.
  • Caveat: most gold loans are interest-only with principal due at maturity, so the borrower's effective cash outflow during the year is interest-only. Early principal repayment drops the average tenor, and effective cost falls in proportion.

Option D — Loan against FD, FD coupon 6% + 2% margin = 8% gross, but FD still earning 6%.

• Net interest cost: 2% × रू 5,00,000 × 1 year = रू 10,000.
• Processing: typically NPR 500–1,000.
• Total cost: ~रू 11,000.

The rank order:

Product	Total cost (full year, fully drawn)	Notes
Loan against FD	रू 11,000	Cheapest by a wide margin
Personal overdraft (avg 50% utilisation)	~रू 23,500	Cheap if drawn flexibly
Personal loan (12%)	~रू 43,000	Standard salaried option
Personal overdraft (full utilisation)	~रू 45,000	Loses its advantage when fully drawn all year
Gold loan (10.5%)	~रू 58,000	Higher headline, but flexibility advantages

Two things to read off this:

1. The FD-backed loan is in a different league. If you have an FD, it is almost always the right product. The only reason not to use it is if breaking the FD has lower cost than the spread, which is rare; early withdrawal penalties are usually 1–2% of the FD amount, not 2% of the borrowed amount.
2. The "right" product depends on your borrowing shape, not just the rate. A flexibly-utilised overdraft beats a fully-drawn personal loan even at a higher headline rate. A fully-drawn overdraft loses to a personal loan at the same nominal cost. Match the product to the cash-flow shape.

The fees most brochures bury

Every product has at least one cost line that does not appear on the rate sheet. Before signing, check for these:

Personal loan:

• Processing fee: typically 0.5–1.5% of loan amount, sometimes capped (e.g. SBI charges up to 1.5%, capped between Rs. 1,000 and Rs. 15,000).
• Loan insurance: bank-pitched bundled product, often optional but presented as required.
• Prepayment penalty: 2–5% of outstanding principal for fixed-rate loans within the lock-in period (typically 12–24 months).
• CIC report fee: NPR 200–500.

Gold loan:

• Appraisal fee: NPR 100–500 per pledge.
• Storage/locker fee: usually waived during loan tenure, charged if the gold sits unredeemed past maturity.
• Re-appraisal at renewal: charged again each year.
• Auction notice fee: triggered if you default — banks send registered notice before auctioning the pledge, and the fee is added to your dues.

Overdraft:

• Commitment fee: 0.25–0.5% per annum on the unused limit at some banks.
• Renewal fee: an OD limit is typically reset annually, with documentation and a renewal charge of 0.25–0.5%.
• Minimum interest: some banks charge interest on a notional minimum balance, even if drawn amount is lower.

LAFD:

• Lien-marking fee: NPR 200–500 to formally pledge the FD.
• The big hidden cost is the loss of premature-withdrawal flexibility. Once an FD is liened, you cannot break it without first clearing the loan.

Choosing by borrowing shape

The product fit for common Nepali borrowing scenarios:

Wedding (one-shot, large, 6–18 months to repay). Personal loan with EMI is the cleanest. Predictable repayment, no recurring documentation, locks in the rate. If you have FD or gold available, prefer LAFD, with gold loan a step behind. Skip the overdraft; wedding spending has no cashflow shape that benefits from flexible drawing.

Medical emergency (one-shot, urgent, uncertain repayment timeline). Gold loan or LAFD wins on speed. The branch can disburse a gold loan within 60–90 minutes at many banks. LAFD via NIC Asia mobile is instant up to NPR 2,00,000. A personal loan typically takes 3–7 days for KYC and disbursal, which matters when you are paying a hospital advance.

Business working capital (recurring, irregular, partial utilisation). Overdraft is the right shape. You draw to pay vendors and repay when invoices clear; interest accrues only on the gap. A personal loan over-pays because you carry interest on the unused portion. Gold loan or LAFD works if cheaper, but the operational hassle of repeated draw-and-repay against pledged collateral is higher.

Home renovation (one-shot, medium-large, 1–3 years). Personal loan with EMI is the structural fit. A top-up on an existing home loan, if you have one, is usually cheaper because it inherits the home loan's secured rate. LAFD also works if you have a large FD.

Bridge financing (short, 1–3 months, awaiting a known inflow). Overdraft, full stop. The product is built for this shape. Drawing against an OD for 30 days costs roughly 1/12 of the headline rate. Doing the same with a 1-year personal loan and prepaying triggers prepayment penalties that destroy the math.

Kid's school admission fees (recurring annually, predictable). Sinking fund, not a loan. Use the sinking funds approach instead. You should not be borrowing for an expense you knew about 12 months in advance.

What gets misjudged most often

A few patterns I keep seeing in reader emails:

"I'll just use a credit card for the gap." Credit cards in Nepal carry effective rates of 24–36% per annum on revolving balances. They are the most expensive consumer credit available. Use the card for transactions, but always settle in full by the due date. If you are revolving a balance, anything on this list (even a finance-company personal loan at 14%) is cheaper.

"My parents have gold sitting in the locker; let me take a gold loan." The gold appraisal is at the bank's standard, which knocks down ornament value vs market: a tola of ornaments at 22-carat market price NPR 2,86,891 typically appraises at 70% × ~NPR 2,80,000 = ~NPR 1,96,000 of borrowable limit, before the bank deducts making charges. Plan on an effective LTV of around 65% of market value, not 70% of the printed receipt.

"I'll keep my FD and take an unsecured personal loan instead." Almost always wrong. The FD-backed loan at FD-coupon + 2% (so ~8% all-in if your FD is 6%) beats virtually any personal loan rate in the market. Preserving FD liquidity is a real concern, but liening it for a loan doesn't break the deposit. You still earn the coupon, and the loan can be repaid from incoming salary to restore full FD access.

"The overdraft has no fixed repayment, so I'll just keep it open." Overdrafts compound silently. Without a defined payoff plan, an OD that started as bridge financing turns into a permanent leak. Treat any OD draw as having an implicit due date on the calendar.

A 2-minute decision tree

Borrowing for a one-shot expense?
├── < 1 year, urgent
│   ├── Have FD?              → LAFD (cheapest, fastest)
│   ├── Have gold?            → Gold loan
│   └── Salaried, neither?    → Personal loan
├── 1–7 years, structured
│   ├── Have FD?              → LAFD if amount fits; else top-up FD as collateral
│   ├── Salaried professional → Personal loan with EMI
│   └── Self-employed         → Gold loan (1yr renewals) or secured OD
└── Ongoing, irregular        → Overdraft (personal or secured)

The honest version: most readers reach for "personal loan" by reflex because it is the most marketed product. For borrowers who actually have any collateral, it is rarely the cheapest option.

Tracking debt in Kharchapatra

If you take any of these on, log it as a separate liability account in Kharchapatra so the total debt picture is visible:

• Loan account name with the product type and rate, e.g. "Gold loan — Bank X — 10.5% — matures 2027-04". Future-you will not remember which product is which by the third one.
• Principal vs interest separation. Split each monthly payment between principal repayment and interest expense in your transaction notes. Otherwise the monthly review just shows a line item that drains money without decreasing the loan balance visibly.
• Calendar reminder for renewal/maturity. Gold loans, ODs, and LAFDs all renew annually. Banks renegotiate rates inside a 60-day pre-renewal window; miss it and you accept whatever the auto-renewal offers.
• For overdrafts: track utilisation, not just balance. A high-balance OD is fine. A high-utilisation OD (>80% of limit drawn for >90 days) is a sign that the OD has become a quasi-term loan and should probably be refinanced into one.

The monthly money review post covers the rhythm. For borrowers, the debt page is the single most important screen during that ritual.

Three questions before you sign

1. What is the actual cash-flow shape of this borrowing: one-shot, recurring, or irregular? Match to product before comparing rates.
2. Do I have any collateral I am ignoring (FD, gold, existing home loan)? If yes, the secured product almost always wins on rate.
3. What is the total cost over the life of the loan, including processing, insurance, and prepayment penalties? The headline rate is necessary but not sufficient. A 1% processing fee on a 1-year loan adds 100 bps to the effective rate.

Pass all three and you have probably picked the right product. Skip any one and you are likely overpaying by NPR 5,000–25,000 a year on the same nominal borrowing.

Have a specific borrowing decision you are working through, or a bank that offered terms you are not sure how to read? Email parjanya57@gmail.com and I will walk through the all-in math against your specific cash-flow shape.