Loan Against Securities vs Personal Loan: Which Should You Choose? 

At first glance, a loan against securities and a personal loan solve the same problem: they give you quick access to funds. However, that’s where the similarities end.  

A loan against securities lets you borrow by pledging eligible investments as collateral, often at a lower interest rate than a personal loan. A personal loan, by contrast, requires no collateral and is approved based on your income and credit profile.  

Understanding the difference between a personal loan and a loan against securities can help you choose the option that best suits your finances, borrowing costs and risk level.  

What is a loan against securities (LAS)? 

A loan against securities is a secured loan that allows you to borrow against the value of your financial investments, such as shares, mutual funds, bonds or certain insurance policies, instead of selling them.  

The lender provides funds up to a specified percentage of your portfolio’s current market value, with the investments serving as collateral. Your securities remain in your name, so you can usually continue to receive dividends, interest or bonus benefits where applicable. However, they remain pledged to the lender and cannot be sold or transferred until the loan is fully repaid.  

What is a personal loan? 

A personal loan is an unsecured loan, which means you don’t have to pledge any assets as collateral. Instead, lenders assess your eligibility based on factors such as your income, employment stability and credit score.  

Because the lender takes on more risk, personal loans generally carry higher interest rates than secured loans. Approval is often quicker, with repayment made through fixed monthly EMIs over an agreed tenure.  

With personal loans, you should take the time to understand the impact of the repo rate on personal loans. If your loan has a floating interest rate, changes in the RBI’s repo rate can affect your borrowing costs and, in turn, your monthly EMI.  

Loan against securities vs personal loan: Key differences 

Choosing between a loan against securities and a personal loan is a balancing act between cost, flexibility and risk. A loan against securities lets you unlock the value of your investments without selling them, often at a lower interest rate because the loan is backed by collateral.  

A personal loan, on the other hand, requires no collateral and is usually quicker to access, making it a practical option when you don’t have investments to pledge or prefer not to tie them up. 

The right choice depends on your financial situation, the assets you own and how you plan to use the funds.  

Here’s how a loan against securities compares with a personal loan across the key parameters: 

Which one should you choose? 

If you find yourself trying to choose between a loan against securities or a personal loan, think about your financial position and how urgently you need the funds. Here are some optimal use cases: 

• If you have investments to pledge and want a lower rate: A loan against securities may be a good choice if you hold a reasonably sized portfolio of shares, mutual funds or bonds and are comfortable locking them as collateral. The interest rate advantage can be meaningful on larger loan amounts. 

• You want to keep your investments untouched or plan to trade them: Once pledged, you cannot sell or transfer your securities until the loan is cleared. If your portfolio is actively managed or you may need to exit a position, a personal loan is the better call. 

• You need funds fast and don’t want any collateral involved: A personal loan is quicker to access and requires no security assessment. For example, FatakPay’s instant loans of up to ₹20,000* are disbursed in approximately 7 minutes using just your PAN and Aadhaar. 

• You don’t have a strong credit history: A loan against securities doesn’t rely heavily on your credit score since the collateral itself reduces lender risk. If your credit profile is thin or recovering, this option may be accessible when a personal loan is not. Equally, if you’re rebuilding credit and need a collateral-free option, a personal loan without bank statements may suit borrowers who have limited documentation available. 

Risks to consider with a loan against securities 

One of the biggest differences between a loan against securities vs a personal loan is the risk of a margin call. With an LAS, the amount you can borrow is linked to the market value of the investments you pledge as collateral. 

If the value of those investments falls during the loan tenure, your lender may issue a margin call, requiring you to either repay part of the loan or pledge additional securities to restore the required loan-to-value ratio. This means market fluctuations can directly affect your borrowing, potentially forcing you to arrange funds when markets are already under pressure. 

A personal loan carries no such risk. Your repayment schedule is fixed at the time of sanction, so your EMIs remain predictable regardless of what happens in the financial markets. 

Get a collateral-free personal loan with FatakPay 

Don’t want to pledge your investments? Get a collateral-free FatakPay personal loan with quick approval and flexible tenure. Whether you need up to ₹20,000* for an urgent expense, disbursed in about 7 minutes with just PAN and Aadhaar, or up to ₹5,00,000* for a larger goal like home renovation or a wedding,  

Conclusion 

Choosing between a loan against securities vs personal loan is really a question of what you value more: a lower interest rate or simplicity and speed. If you have a sizeable investment portfolio and want to borrow at a lower interest rate without selling your investments, a loan against securities can be an effective option. If you need funds quickly, don’t have investments to pledge or prefer the certainty of fixed repayments without market-linked obligations, a personal loan may be the better fit. 

Before you decide, compare the total borrowing cost, repayment terms and eligibility requirements, and choose the option that best aligns with your financial goals rather than simply the one that’s easiest to obtain. 

FAQs 

Is loan against securities cheaper than a personal loan? 

Generally, yes. Because the lender holds your investments as security, the risk is lower and interest rates on a loan against securities are typically more competitive than on an unsecured personal loan. However, the actual rate depends on the type of securities pledged, the lender’s LTV policy and your overall profile. 

What happens if my pledged securities’ value falls? 

If the market value of your pledged portfolio drops below the required loan-to-value threshold, your lender can issue a margin call. This means you’ll need to either repay part of the outstanding loan or pledge additional securities to bring the ratio back into compliance. Failure to respond to a margin call can result in the lender liquidating a portion of your portfolio to recover the shortfall. 

Can I get a personal loan without any collateral? 

Yes. Personal loans are unsecured by definition, so no collateral is required. Lenders assess your income, credit score and repayment capacity to determine eligibility and loan amount. This is one of the main advantages of a personal loan over a secured option like a loan against securities. 

Which loan is approved faster? 

Personal loans are generally approved faster, particularly with digital lenders who can verify documents and disburse funds quickly. FatakPay, for instance, disburses instant loans of up to ₹20,000 in approximately 7 minutes. A loan against securities takes longer because the lender needs to verify, value and process the pledge on your securities before the loan can be sanctioned. 

Can I prepay a loan against securities without penalty? 

This depends on the lender’s terms. Some lenders allow partial or full prepayment without penalty on a loan against securities, particularly when it’s structured as an overdraft facility, since you only pay interest on the amount drawn. Others may charge a foreclosure fee. Always check the specific prepayment conditions in your loan agreement before signing. 

Is a personal loan better if I don’t have investments to pledge? 

Yes. If you don’t hold a portfolio of shares, mutual funds or bonds, a loan against securities is simply not available to you. A personal loan based on your income and credit score is the appropriate option. It’s also worth considering if your investments are modest in size, since a small portfolio may not generate a loan amount that justifies the complexity and margin-call risk of a LAS.