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What should you select between a personal loan and a loan against securities?

Loans against securities are a cost-effective option for borrowers with significant holdings, while personal loans are an accessible option for those without.

Depending on your financial status and funding requirements, you may choose to choose between a personal loan and a loan against securities. Every loan kind has advantages and downsides of its own, so you should choose one after carefully weighing your needs.

In order to obtain a loan from a financial institution or lender, people might use their current financial assets, such as stocks, mutual funds, or other securities, as collateral. This financial instrument is known as a loan against securities. Borrowers can obtain funds with this kind of loan without having to liquidate their investments. A personal loan, on the other hand, is an unsecured loan and is therefore available to a wider variety of applicants. When deciding between the two, keep the following things in mind:

A loan secured by securities

Collateral for investments: You must offer your securities, such as stocks or mutual funds, as security. The lender may sell your securities to recoup the loan balance if you default on it.

Rates of interest: Because these loans are secured by collateral, they often have lower interest rates than personal loans do. Depending on the lender, interest rates can range between 9% and 14%. A loan against securities might have cheaper rates if you have valuable securities and feel confident pledging them without jeopardizing your financial security.

Credit amount: The value of the securities you pledge as collateral will typically determine the loan amount. It might be between 50% and 70% of the entire value of the securities. According to the borrower and the lender, it might be higher in some circumstances.

Tenure: Compared to personal loans, lending terms for loans against stocks are frequently shorter. The offered repayment period ranges from one year to three years. However, this can change based on your lender and the loan conditions.

Processing period: Since the lender already has the collateral in their possession, processing times for these loans are quicker. A loan against securities might be more appropriate if you require immediate access to money because of its quicker processing.

Investment risk: If you are unable to repay the loan, you run the risk of losing your investments. You can be required to pledge more securities or make partial loan repayments if the value of your securities dramatically declines.

According to CEO Adhil Shetty, “Depending on your repayment methods and funding needs, you must carefully choose your solution. The lenders have the right to sell your holdings in order to recoup their losses if you are unable to repay the loan against securities throughout the loan term.

Personal loan

Collateral-free: There is no need for collateral for personal loans. Since they are unsecured loans, anyone can apply for them even if they don’t have any valuable assets to pledge. You can be eligible for a personal loan with favorable terms if you have a strong credit rating and a consistent source of income.

Interest rates: Because personal loans have a larger level of risk for the lender than loans secured by securities, they typically have higher interest rates. The interest rate could range between 11% and 15%. The bank and your credit score will determine whether it is lower or greater.

According to Shetty, “Personal loans can be a useful financial tool when used responsibly, but borrowers should carefully consider their ability to repay and compare offers from different lenders to secure the best terms and interest rates for their needs.”

Loan amount: Your creditworthiness, income, and other financial considerations will all have an impact on how much you can borrow from a personal lender. It might be less than what you could receive from a loan secured by securities.

Tenure: Personal loans can include adjustable repayment terms, letting you select the length of time that best suits your financial circumstances. It might be anywhere from 12 to 60 months.

Processing time: Because the lender must evaluate your creditworthiness and financial history, the approval process for personal loans may take longer. However, you can also receive pre-approved offers for personal loans if your credit history is spotless and you make your debt payments on time.

Risk: Personal loans don’t put your assets at danger, but missing payments can hurt your credit report and limit your ability to borrow money in the future. Before applying for a personal loan, it is advised to weigh all the advantages and disadvantages. Additionally, paying more in interest may put you at risk of default. Therefore, even before asking for the loans, one must have a repayment strategy prepared.

“The decision between a loan against securities and a personal loan depends on individual financial circumstances,” explains Raoul Kapoor, co-CEO of Andromeda Sales and Distribution. Loans secured by securities, such as stocks or bonds, offer lower interest rates and bigger loan amounts based on the value of the collateral. Personal loans, in contrast, have higher interest rates that are, say, 1.5% to 2% greater than those that apply to loans secured by property, are unsecured and are accessible without collateral.

Loan against securities is a cost-effective option for borrowers with significant holdings, whilst personal loans are an accessible option for those without. In the end, the choice should be in line with one’s financial objectives, risk tolerance, and availability of collateral.


  • Your repayment plans will determine whether you choose a personal loan or a loan against securities.
  • You can be required to pledge more securities or pay back a portion of the loan if the value of your securities declines.
  • Personal loans require a longer approval process because the lender must determine your creditworthiness.


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