Today, many financial instruments are available in the market to help you tide over any financial instability. The emergence of new-age Non-Banking Financial Companies (NBFCs) and lending institutions has made it easier for people to avail of loans. These lenders are offering affordable and easy Personal Loans and Loans against Securities that are effective in covering your varied financial requirement.
So, which one should you choose when it comes to Personal Loans and Loan against Securities? In this blog, we will compare the two to gain a better perspective regarding these financial instruments.
Personal Loans Vs Loan Against Securities: Key Differences
Instant personal loan in India are easy to avail of. They do not require hefty paperwork. These loans are unsecured loans, which means you do not have to submit your assets as security. Personal Loans come with lower interest rates and no end-use restrictions.
On the other hand, a Loan against Securities requires you to submit your assets such as mutual funds, shares, or life insurance policies to avail of a loan. These loans are secured loans. Loans against securities are generally offered as a loan overdraft facility after you have deposited your securities. You can withdraw funds as per your requirement, and you only have to pay interest on the amount withdrawn. Your loan amount depends on the total amount of securities you have pledged.
If you wish to acquire higher-value funds, you can opt for a Loan against Securities as the loan amount can be higher than Personal Loans based on the value of securities. A loan against securities is a type of secured loan.
Further, applying for these loans is easy as lenders are offering complete online loan applications. You can avail of a Personal Loan or a Loan against Securities at competitive interest rates. You can apply for these loans from your home or office. Online applications ensure faster processing, helping you save time. You only have to upload minimal documentation, await verification, and get the funds disbursed into your account within hours.
| Personal Loans | Loans Against Securities | |
| Loan amount | Up to ₹30 Lakh | Up to ₹10 Crore |
| Loan tenure | 12-60 months | Up to 15 years |
| Interest rates | Starting from 9.99%* p.a. | Starting from 9%* p.a. |
| Pre-payment/foreclosure charges | None | 4% of the outstanding amount plus taxes |
Further, having a healthy credit score will help you avail of these loans at attractive interest rates. Your credit score is one of the key elements in your loan journey. It is used to evaluate creditworthiness by lenders. Financial institutions and lenders check your credit score among other factors to approve your loan application.
If you have a healthy credit score, it will show you as a reliable borrower. Lenders might even offer you a lower interest rate based on your bureau score and credit history. Apart from your credit score, lenders also go through your official documents for eligibility, along with past financial habits and hygiene.
To maintain a good credit score, ensure that you do not miss out on any monthly payments. Missing out or late payment of EMIs negatively impacts your credit score. This might lower your chances of availing of a loan in future.
You can use an online EMI calculator to calculate your monthly payments before applying for a secured or unsecured loan. Online EMI calculators are easy to use and are available on the lender’s website. You just have to enter your loan amount and loan tenure, against which your EMIs will be calculated. The tool quickly gives out your Personal Loan Interest Rates & EMI amount.
In this way, you can plan your monthly payments accordingly before applying for the loan. This will help you keep aside the amount for your monthly payments so that you don’t experience financial stress during your loan journey.
In conclusion
If you do not wish to pledge any assets for getting a loan, a Personal Loan is a better option. In the case of a loan against securities, the value of the underlying (shares, MF units, etc.) varies from time to time. Hence, you may have to pay some amount from time to time (over and above the regular repayment) if the value of the underlying goes below a limit defined by the lender. There is no such hassle in the case of a Personal Loan, hence it is a much better option.
