Emergencies can occur at any point in life, affecting you mentally and financially. The financial pressure cannot be neglected. Under these emergencies, you can check numerous loan options to stay financially secure. The two most popular loan types that are gaining popularity are the loan against securities and personal loans. These loans offer common benefits as they help you easily sail through financially stressful situations.
This blog will help you understand the differences between the two for a better understanding.
What is a Loan Against Securities?
As the name clarifies, the loan against securities are secured loans that you can borrow by pledging your collateral or asset in return. The securities that can be used include:
- Mutual Funds
- Insurance Policies
- Non-Convertible Debentures
- NSCs
- Shares and more
Since the lender can use the collateral in case of non-repayment of the loan amount, they consider borrowers to be reliable and provide them loans with low-interest rates. Also, the amount of loan that can be availed depends on the collateral’s value.
Benefit of Loans Against Securities
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Simplified Processing
The application process for a loan against securities is streamlined and simplified, as it does not require extensive documentation such as income proof. This makes the approval process faster and more efficient.
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Lower Interest Rates
As discussed earlier, the interest rates on these loans are typically lower, reflecting the lower risk for the lender due to the collateral provided. The low interest rate is the most crucial factor that affects many borrowers applying for this loan. This is because increasing interest rates potentially increases the amount to be repaid, thus causing a financial burden.
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Flexible Repayment Options
With the loan against securities, you get the flexibility to choose between two repayment options – demand or overdraft based on your financial needs and preferences.
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Uninterrupted Returns and Dividends
Even during the loan term, investors continue to receive returns and dividends on the securities used as collateral, ensuring ongoing income.
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High Loan Amount
With a loan against securities, you have the potential to borrow up to 50% to 70% of the market value of the relevant security. This allows you to comfortably access a substantial amount to fulfill your diverse financial requirements.
What is a Personal Loan?
A personal loan is an unsecured loan that you can easily apply without risking any of your collateral in return. Since you do not have to pledge your assets to avail of the loan amount, applying for a personal loan offers peace of mind, but the interest rate charged on the loan amount is comparatively high. Furthermore, the easy application process and instant approvals have been the reason behind the increasing demand for personal loans.
Benefits of Personal Loan
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Versatile Use
The amount of a personal loan can be used for numerous purposes, whether you want to plan a trip, meet marriage expenses, consolidate debt, or deal with a medical emergency. There is no restriction on end usage of the loan amount.
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Quick Approval and Disbursement
The application process for personal loans is typically streamlined. With a few easy steps and minimum documents, you can apply for the loan amount with ease. Thus, a personal loan helps provide timely assistance during times of financial need.
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Flexible Repayment Term
With a personal loan, you can enjoy the convenience of flexible repayment terms, tailoring the schedule to align with your financial circumstances. This flexibility enhances the overall suitability of the loans, ensuring you can easily and effectively manage your financial commitments.
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Credit Score Building
Responsible and timely repayment of personal loans can positively impact your credit score. A higher score of generally 650 and above will make you a responsible borrower in the eyes of the lender and will help you to easily avail yourself of the loan amount in the future.
Loan Against Securities Vs Personal Loan
Are you confused about whether to apply for a loan against securities or a personal loan? This detailed comparison will help you gain a better understanding.
| Parameter | Loan Against Securities | Personal Loan |
| Collateral Requirement | Secured loan | Unsecured loan |
| Interest Rates | Lenders charge low interest rates because of low risk | Lenders usually charge high interest rates to cover the risk |
| Loan Amount | The loan amount depends on the assets value | There is a maximum limit to the loan amount |
| Repayment Tenure | The repayment tenure is generally higher, extending to up to 15 years | The repayment tenure is shorter for up to 60 months |
| Documentation | The application process required extensive documentation | Loan can be availed with minimum documents |
Apply for an Instant Loan with the Tata Capital Loan App!
Both the loan against securities and personal loans are the best funding options that you can rely on to meet immediate requirements without any hassle. Your final choice between the two should depend basically on loan requirements, risk appetite, and repayment capacity.
Tata Capital is one of the reliable NBFCs in India that offers various types of loans to help borrowers meet their requirements. Their loans are available with easy terms and conditions and at competitive interest rates. All you need to do is fulfill the eligibility criteria for the loan application, and you can easily apply for the loans.
Reach to Tata Capital and experience seamless loan availing process.
