Loan Against Securities vs Personal Loan: Which Is Right for You?

When you need funds urgently, two popular options often come up — a personal loan or a loan against securities (LAS). Both options put cash within reach, but they cater to different financial profiles and needs.

LAS lets you unlock the value of your investments without selling them, typically at lower interest rates, while a personal loan offers flexibility and speed without requiring any collateral.

So which one should you choose? Let’s break it down and help you make an informed decision based on your financial goals, credit profile, and investments.

Key Takeaways

• LAS is a secured loan, where you pledge stocks, mutual funds, or bonds as collateral.
• Personal loans are unsecured, and approval depends largely on your income and credit score.
• LAS usually offers lower interest rates compared to personal loans.

How does each loan work?

Let’s start with the basics of what you’re actually signing up for.

What is a Loan Against Securities (LAS)?

LAS is a secured loan where you pledge your investments — such as equity shares, mutual funds, ETFs, or bonds — as collateral. The lender offers a loan or credit limit, typically up to 80% of the current value of those securities.

•  You retain ownership and continue to earn returns.
• If markets fall, you may be asked to top up the collateral.
• You pay interest only on the amount you use.

What is a Personal Loan?

A personal loan is an unsecured loan, meaning you don’t pledge any assets. The bank or NBFC gives you a lump sum, and you repay it in fixed EMIs over a set tenure (usually 1–5 years).

• Approval depends on your credit score, income, and repayment history.
• Interest is charged on the full amount from day one.
• Once approved, the money is yours to use freely.

LAS vs. Personal Loan: Key Comparison

 

Which is more affordable?

This depends on your situation, but here’s what you should know.

LAS usually has lower interest rates

Since LAS is backed by your investments, lenders view it as low-risk. As a result, interest rates are lower, starting at around 9%, while personal loans can go as high as 24%, especially if your credit score isn’t great.

You pay interest only on what you use

With LAS (especially when structured as an overdraft), you pay interest only on the amount you withdraw, not the entire sanctioned limit. Personal loans, on the other hand, charge interest on the full disbursed amount, regardless of usage.

No need to break your investments

LAS allows your portfolio to keep growing — mutual funds continue earning NAV returns, and shares can still pay dividends. With a personal loan, you might be tempted to liquidate investments to repay your EMIs faster, which can disrupt your long-term planning.

When should you choose LAS?

A loan against securities is better when:

• You have a substantial portfolio in demat or folio form
• You need funds for a short to medium-term goal
• You don’t want to disturb your investments
• You want lower interest rates and flexible repayment

Ideal for:

• Business working capital
• Education fees
• Medical expenses
• Short-term liquidity gaps

When is a personal loan better?

A personal loan works better if:

• You don’t have eligible investments
• Your need is urgent and you want a fixed repayment plan
• You’re comfortable with higher EMIs for convenience
• You prefer not pledging your assets

Conclusion

If you have a strong investment portfolio and want a cost-effective, flexible borrowing option, LAS is the clear winner. But if you don’t have securities or prefer a fixed EMI plan without collateral, a personal loan may suit you better.

Either way, understanding the cost, risk, and repayment structure will help you make the right choice.

This is general guidance. For a personalized borrowing strategy, reach out to our advisors today.