Discover the key differences between Loan Against Securities vs. Personal Loan. Compare features, costs, risks, and ideal situations to choose the right borrowing option.
When you need quick funds, two common options stand out: Loan Against Securities (LAS) and personal loans. Both serve different needs and come with distinct advantages, costs, and risks. Understanding the differences between these borrowing methods will help you make a well-informed decision tailored to your financial situation.
Secure liquidity without selling your investments explore loan against securities for competitive rates and flexible repayment options today.
A Loan Against Securities allows you to borrow funds by pledging your investments such as shares, mutual funds, or insurance policies. Instead of selling your assets, you keep ownership while using their value as collateral. Lenders typically offer a loan-to-value (LTV) ratio of 50–80%, depending on the security type. This ensures your investments can continue earning dividends or interest while you access liquidity.
A personal loan is an unsecured borrowing option where you receive funds without pledging any asset. Approval is based on your credit score, income, repayment capacity, and the lender’s terms. Personal loans are ideal for borrowers who lack investments to pledge or prefer not to risk their assets. However, the interest rates are generally higher than LAS due to the absence of collateral.
Here is a comparison between loan against securities and personal loan interest rates:
| Aspect | Loan against securities | Personal loan |
|---|---|---|
| Typical interest rates | 8% – 15% p.a. (varies by lender) | 10% p.a. – 30% p.a. (depending on eligibility) |
| Interest Rate type | Often flexible or linked to market rates | Usually, fixed rates during tenure |
| Cost efficiency | Lower rates as collateral reduces risk | Higher cost due to unsecured nature |
Loan Against Securities requires you to pledge investments, which lenders value to determine the loan-to-value ratio commonly 50–80%. Personal loans require no collateral, making them easier to access if you lack securities. However, the absence of collateral increases lender risk, resulting in higher interest rates.
Below are the fees, charges, and other costs of a loan against securities and a personal loan:
| Aspect | Loan against securities | Personal loan |
|---|---|---|
| Processing fees | Up to 4.72% | Up to 3.93% |
| Prepayment charges | Up to 4.72% if sanction amount is above Rs. 5 crores | Up to 4.72% of the loan amount (inclusive of applicable taxes) |
| Additional costs | Pledge creation and maintenance charges | Depends on the lender |
Here is a risk comparison between LAS and personal loan:
| Aspect | Loan against securities | Personal loan |
|---|---|---|
| Market fluctuations | Risk of margin calls if security value falls | Not affected by market risks |
| Asset ownership | You retain ownership of pledged assets | No asset involvement |
| Default impact | Securities may be sold by lender; credit score might get impacted | Credit score impact and possible legal implications |
Avoid selling your investments during downturns, opt for loan against securities to secure funds without disrupting your portfolio.
Here are the features and benefits of LAS:
Here are the features and benefits of personal loans:
Choosing between loan against securities and personal loan depends on your financial position, risk tolerance, and urgency. LAS offers cost efficiency and portfolio continuity, while personal loans provide quick access without collateral. Evaluate your assets, funding needs, and repayment ability before deciding.
Get funds while preserving your investments. Apply for loan against securities and enjoy competitive rates and flexible terms today.
Yes, a loan against securities is generally cheaper than a personal loan. Since LAS is secured by your investments, lenders view it as lower risk and offer lower interest rates (around 8–15% p.a.), whereas personal loans are unsecured, often attracting higher rates (10% p.a. – 30% p.a.)
Personal loans are typically faster as they require minimal documentation and no collateral evaluation. Loan Against Securities may take slightly longer because lenders must verify and pledge your securities. However, if your securities are already dematerialised and approved, LAS can also be processed quickly within 24–48 hours*.
For LAS: KYC documents, proof of securities ownership (like a demat account statement), and a signed pledge form are required.
For personal loans: KYC documents, proof of income (salary slips, ITRs), bank statements, employment verification, and some other documents are typically needed for approval.
Yes, most lenders allow LAS to be used for almost any legitimate purpose, business expansion, education, medical emergencies, weddings, or travel. However, speculative trading, illegal activities, or investing in risky ventures may be restricted by the lender’s terms and regulatory guidelines. Always check permitted uses beforehand.
There are usually no hidden charges in loan against securities; all charges are disclosed upfront in the application form, KFS, and agreement.
What is the ideal time to avail Loan Against Securities?
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