Loan Against Securities Vs Personal Loan - Which One to Choose?
- What Is LAS or Loan Against Securities?
- What is a Personal Loan?
- Difference Between Loan Against Securities and Personal Loan
- How Does Loan Against Securities Work?
- LAS vs Personal Loan - Which is Right for You?
- Fees and Charges - LAS vs Personal Loan Compared
- Hero FinCorp LAS Process and Personal Loan Application Guide
- Frequently Asked Questions
Jignesh, a salaried agent, needed Rs. 3 lakhs for a family emergency. He applied for a personal loan, because he needed urgent funds and did not have investments to use as collateral.
Payal, a boutique owner, wanted funds for home improvement. Since she had high-value mutual fund investments, she used them as collateral for a loan against securities.
The cases of these two borrowers introduce a vital issue - which is better loan against securities or personal loan?
Loan against securities vs personal loans serve the same purpose; however, they differ in various aspects.
What Is LAS or Loan Against Securities?
A Loan Against Securities is secured by the borrower's approved investments or securities. The loan amount depends on the current value of the collateral.
Comparing LAS vs personal loans, LAS has a low interest rate because of the collateral.
What is a Personal Loan?
It is a loan where no collateral is required from the borrower. One can get a loan based on income, repayment ability, occupation, and credit score.
Personal loans can be used for several purposes, such as:
- Hospitalisation costs
- Weddings
- House renovations
- Vacations
- Repayment of debts
- Tuition fees
For customers who prefer not to use securities, personal loans offer a convenient option. This is one of the major differences between LAS vs personal loan.
Also Read: Which Type of Loan is Best for Home Renovation?
Difference Between Loan Against Securities and Personal Loan
The main difference between loan against securities and personal loan revolves around the collateral. Main points of LAS vs personal loan are:
| Parameter | Loan Against Securities | Personal Loan |
|---|---|---|
| Type of Loan | Secured | Unsecured |
| Collateral | Necessary | Not Necessary |
| Amount of Loan | Dependent on security value | Dependent on income and eligibility |
| Approval Speed | Medium | Faster |
| Interest Rates | Lower | Comparatively higher |
| Credit Score Relevance | Medium | High |
| Assets Risk | Pledged assets are at stake in case of default | No pledge of any assets |
| Tenure of Repayment | Tenure is flexible according to the lender | Fixed tenure |
| Documentation | Documents related to assets | Documents related to income and identification |
How Does Loan Against Securities Work?
The loan against securities process is simple:
- Select eligible securities accepted by the lender.
- Apply for a loan.
- Pledge the selected security.
- Wait for the lender to assess the asset value and sanction the loan amount accordingly.
- Transfer of funds to the borrower’s account after approval.
- The securities will be kept as collateral until the loan is paid off.
Bonus Tip - Market movements can change the value of pledged assets. Under certain circumstances, lenders may demand additional collateral from borrowers.
Also Read: What is Collateral Loan? Meaning, Types, & How it Works
LAS vs Personal Loan - Which is Right for You?
If you're wondering which is better loan against securities or personal loan, the answer depends on your financial situation.
| Choose LAS If You... | Choose Personal Loan If You... |
|---|---|
| Possess investible assets | Don’t have pledgeable assets |
| Don’t wish to sell off investments | Want quick disbursal of money |
| Can pledge your assets | Prefer a non-collateral loan |
| Expect cheaper borrowing rates | Expect a simpler application process |
| Require funds depending on investment value | Meet the income and credit score eligibility criteria |
Many employees and the self-employed find personal loans appealing because they can bypass the asset-pledging process and complete online applications easily.
Also Read: Personal Loan vs Line of Credit: Which Borrowing Option Is Right for You?
Fees and Charges - LAS vs Personal Loan Compared
When comparing LAS charges and personal loan fees, it is always advisable to check the lender’s fee structure thoroughly.
| Charge Type | Loan Against Securities Fees | Personal Loan Charges |
|---|---|---|
| Processing Fee | Applicable | Applicable |
| Documentation Charges | May apply | May apply |
| Foreclosure Charges | Depends on lender policy | Depends on lender policy |
| Late Payment Charges | Applicable | Applicable |
| Valuation Charges | May be charged for some securities | Not applicable |
Hero FinCorp LAS Process and Personal Loan Application Guide
If you want to know about the unsecured personal loan or loan against securities application process, here are the steps you should follow:
Step 1 - Go to the Hero FinCorp Instant Personal Loan journey. You can also use the Hero FinCorp Digital Lending & UPI App – Android/iOS.
Step 2 - Check your eligibility.
Step 3 - Fill out the application form.
Step 4 - Upload necessary verification details and documents.
Step 5 - Wait for approval and quick disbursement, depending upon eligibility.
Also Read: Types of Loans in India: A Complete Guide
Which One to Go For - Loan Against Securities Vs Personal Loan
The comparison between LAS and personal loans depends on the type of assets one has, how soon one needs the money, and one's willingness to pledge investments.
If one owns eligible securities, one may consider LAS. But if one is looking for a collateral-free, quick, and easy-to-apply loan, then a personal loan can help.
Check your eligibility for Hero FinCorp's Instant Personal Loan now.
Frequently Asked Questions
Can I take a loan against securities and a personal loan at the same time?
Yes, if you meet the lender's eligibility requirements and have repayment capacity, among other conditions.
Is loan against securities valid only for mutual funds?
No. You can take loans against stocks, bonds, and insurance policies, depending on the lender’s policy.
Can a loan against securities affect my credit rating?
Yes, just like any credit service, this loan may affect your credit rating.
Are there any foreclosure charges on loans against securities?
Foreclosure terms may vary among lenders. Read the terms of your loan contract before signing it.
What will happen if the value of the pledged securities becomes less than the minimum margin?
Depending on the contract, you may be asked to provide additional security or repay in full or in part.
How soon will I get money in case of loan against securities vs personal loan?
Processing time depends on the lender. In most cases, you may get funds sooner from a personal loan, as it doesn’t require an evaluation of your assets.
Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.
