Personal Loan vs Loan Against Securities: Interest Rates, Benefits And Risks | Business News

Last Updated:July 09, 2025, 13:16 IST

Personal Loans can be used for various financial needs, such as medical emergencies, home renovations, or any other purpose.

LAS usually comes with lower interest rates.

During financial emergencies, individuals often rely on loans from Banks or several NFBCs for borrowing money for a given period at set interest rates. Banks offer a wide range of loans to meet clients’ demands and preferences. When searching for a loan, you may have come across two options: personal loans and loans against securities. While the latter allows you to use your existing capital for credit, a personal loan offers unsecured funds based on your financial standing.

If you’re confused about what to choose between the two, here’s a guide to help you:

Loan Against Securities:

It is a secured loan that allows you to borrow money by surrendering your financial assets. You can use stocks, bonds, mutual funds, insurance policies and other assets as collateral.

A loan against securities allows you to tap into the potential of your investment without having to liquidate it. Keep in mind that the bank will keep these securities until you repay the loan in full.

Notably, you can expect reduced interest rates on loans against securities. It is due to the lender’s ability to use collateral in case of a default.

Personal Loan:

A personal loan, on the other hand, is unsecured, where you do not have to provide any collateral to the bank. It can be used for various financial needs, such as a medical emergency, home renovation, or any other purpose.

Instead of collateral, banks consider the applicant’s loan eligibility. This is determined based on the applicant’s credit history, income, and ability to repay. Personal loan interest rates are likely to be higher than those of secured loans. However, the interest rate can also be determined by credit score, income stability and more.

Key Difference:

Collateral Requirement

To obtain a loan against securities, you must pledge financial assets as collateral. A personal loan has no such criteria, as it depends on your repayment history and credit history.

Interest Rates

The LAS generally comes with lower interest rates, ranging around 9-11 per cent, while Personal Loan rates can range between 10-25 per cent depending upon credit profile, credit score and associated lender risk.

Loan Amount

A loan against securities can have a loan amount based on a percentage of the pledged assets’ value. This can limit how much you can borrow. In contrast, the loan amount for a personal loan is determined by your credit history and income.

Fund Usage

Both loans provide liberty in the use of funds. Personal loans, on the other hand, are commonly utilised to cover immediate personal expenses. Loans against securities, on the other hand, may be employed by persons who require finances while also preferring to maintain their investment portfolio.

Which One to Choose?

If you have assets to pledge, a loan against securities may be more cost-effective due to lower interest rates. A personal loan might help you preserve your assets free of debt.

If you are sceptical of risk and do not want to tie up your assets, a personal loan is a safer option. A loan against securities is appropriate if you are comfortable utilising your securities as collateral.

If you require a large amount, you can consider opting for a Personal Loan as the Loan Against Security might not get you the full amount.

A loan against securities may be a preferable option if you have a large portfolio and do not want to liquidate it.

Understanding your financial condition, goals, and risk tolerance is critical to making the right decision. Choosing the proper loan will help you achieve your financial needs most effectively.

It is advised to check interest rates for both Personal Loans and Loans Against Securities at different banks.

Business Desk

A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More

A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More

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Delhi, India, India

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