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How do you choose between a personal loan vs using securities as collateral for a loan?
Posted on Thursday, March 28th, 2024 | By IndusInd Bank
Uncertainty is constant despite having a robust financial plan in place. Unanticipated financial crises may arise at any moment in life due to health emergencies, sudden job loss, damage due to natural disasters, etc. Moreover, you may often fall short of funds for children’s higher education, sudden home renovation, and potential investments. These situations may call for financial assistance. This is when various types of loans available come to the rescue and provide necessary financial assistance to meet urgent needs.
This article mainly delves into two important types of loan products – personal loans and loans against securities. Understanding these products and knowing the key differences between them can help you make the most suitable choice.
Personal Loan
A personal loan is an unsecured loan that requires no collateral to avail the credit. Personal loans can be typically availed depending on eligibility, income, ability to repay, and creditworthiness. Personal loan interest rate range may vary from one bank/lender to another.
You can take a personal loan at a competitive rate from IndusInd Bank through the online personal loan application process. The application process is simple with no paperwork, instant approval, and quick disbursal of the amount make it a simple and convenient solution for immediate financial needs. It comes with flexible loan tenures ranging from 12 months to 48 months and repayment can be customised as per your requirement.
Also Read: Personal loan interest rates and charges – IndusInd Bank
You can avail IndusInd bank personal loans via the online personal loan application process for various needs such as weddings, home renovations, higher education, travel, etc. Depending on the eligibility, you can avail up to a maximum of INR 5 lakhs with instant approval online. However, it is important to be aware of the terms and conditions, fees, and costs associated with the loan.
Also Read: All you need to know about online personal loan applications
Loan Against Securities
A loan against securities is a secured loan product or a collateral-based loan. You can borrow by pledging securities such as bonds, scrips, and mutual funds as collateral. As the loan is backed by collateral, the loan against securities interest rates is relatively lower than the personal loan interest rates. The amount of loan that you can take depends on the value of pledged securities, and the loan tenure is generally for a year.
Key Differences Between a Personal Loan and a Loan Against Securities
| Personal loan | Loan against securities |
| Unsecured, no collateral required | Secured, securities are pledged as collateral |
| The maximum loan amount can go up to INR 5 lakhs depending on the ability to repay | The maximum loan amount depends on the value of pledged securities |
| Easy to avail, paperless instant online loan with quick disbursal | Simple, easy online loan approval with minimal documentation |
| Interest rates can vary from lender to lender and are comparatively higher than the secured loans | Interest rates are generally lower than the unsecured loans |
| Typically availed to meet urgent personal financial needs such as home renovation, medical emergencies, weddings, travel, etc. | Typically availed by investors who need liquidity to invest in new opportunities without selling their existing securities. |
| A personal loan comes with flexible but fixed repayment terms. You need to pay back the loan through EMIs within a specific period. | Loan tenure is typically for a year which can also be renewed. You can choose to pay back in instalments or as a lump sum at the end of the loan tenure. |
Conclusion
In conclusion, both personal loans and loans against securities are the immediate means of finance available. There is a significant difference in the loan products, their features, and the purposes they meet. Understanding the product and the differences can help you make a rational choice depending on your loan needs.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making financial decisions based on the contents and information.
