Loan Against Securities or Personal Loans: What Should You Opt for?

How is a Loan Against Security Different from a Personal Loan?

Are you confused between borrowing a Personal Loan or a Loan Against Securities? You must first understand the difference between the two:

Interest on Personal Loans Vs Loan Against Securities

Here is a comparison of interest rates offered by different banks and NBFCs for both loan types:

Advantages of Loan Against Securities and Personal Loan

While deciding between a Personal Loan and a Loan Against Securities, you must understand that both funding options have advantages that the other lacks. Here’s a look at the pros of both types of loans:

Advantages of Personal Loans:

• You can use a Personal Loan for almost any purpose without any usage restrictions.

• Due to high competition in the market, you will find a loan plan with reasonable interest rates.

• The borrowing limits are higher according to the lender’s policy.

• These are collateral-free loans that do not pledge any security, asset or guarantor.

• Regular Personal Loan repayment helps build a credit history.

• With minimal formalities involved, these loans are faster and easier to access.

• The repayment schedule is easily manageable, with flexible loan terms of up to 60 months.

Advantages of Loans Against Securities

• The Loan Against Securities interest rate is lower due to the lower risk involved for the lender.

• A Loan Against Securities can have two repayment options: demand or overdraft.

• The returns and dividends continue accruing even during the loan term.

• Easy processing due to no income proof and other documents involved.

Disadvantages of Loan Against Securities and Personal Loan

While both loan types have advantages, they have some disadvantages as well. Let’s take a look at them:

Disadvantages of Personal Loans:

• The interest rates, processing fees, and other charges are higher due to more risk for the lender.

• Irregular repayment habits may increase your debt over time.

• Since the repayment terms are shorter, the EMIs may become unmanageable even if you choose the longest possible tenure.

• Missing even a single EMI will have consequences on your credit score.

Disadvantages of Loans Against Securities:

• The loan amount is limited according to the value of the pledged securities.

• You cannot sell the securities if they become profitable during the loan term.

• Lenders have a limited list of securities they accept as collateral against a loan.

How to Apply for a Loan Against Securities

• Visit the lender’s website or open the loan app.

• Select the option to apply for a Loan Against Securities.

• Log in to your Demat account.

• Select the securities you may pledge as collateral against the loan.

• Provide additional details and documents.

• Let the verification process complete.

• Receive a loan offer with loan amount and interest rate according to the value of securities.

• Accept the loan offer to begin the disbursal process.

How to Apply for a Personal Loan?

The Personal Loan application procedure is completely online, which you can complete by following these simple steps:

• Download the Hero FinCorp app or visit our official website.

• Go to the Personal Loan page and click Apply Now.

• Enter a few necessary details like your name, contact details, employment information, loan requirements, etc.

• Scan and upload your identity, income, residence proofs, and other essential documents.

• Wait for verification and approval.

• Accept the loan offer to initiate the disbursal process.

Conclusion

Both Personal Loans and Loans Against Securities are lucrative funding options with unique pros and cons. Your final choice depends on your loan requirements, risk appetite and repayment capacity. Whether you borrow a Personal Loan or a Loan Against Securities, ensure you repay it on time to save your credit score and become debt-free.

Frequently Asked Questions

1. What is a loan taken against security called?

A loan taken against a security is called a Loan Against Securities.

2. Why do people take loans against securities?

People take Loans Against Securities to cover their urgent or planned expenses, like medical emergencies, home renovation, weddings, debt consolidation, big-ticket purchases, foreign vacations, study abroad programmes, etc.

3. Can I take a personal loan and invest in stocks?

Personal Loans have no usage restrictions. So, you can take a Personal Loan and invest in stocks. However, it is not advisable as the market is volatile and may result in loss if the stock market goes down. You must take this step only if you are sure of repayment, even under tough market conditions.

4. What are the advantages of Loans against securities?

Low-interest rates, flexible repayment, accruing returns, and minimal documentation are the most notable advantages of Loans Against Securities.

Disclaimer: The interest rates presented in this blog are for informational purposes only. The actual interest rates and terms offered by banks and financial institutions may vary and are subject to change. Before making any financial decisions or commitments, we strongly recommend consulting with the respective banks or financial institutions to get the most up-to-date and accurate information. The blog content provides general information and should not be considered as financial advice. Any financial decisions you make should be based on a thorough understanding of your individual financial situation and careful consideration of the options available to you. Always conduct your research and seek professional advice if necessary.