BORROWINGS: Loan against securities more cost-effective

financialexpress.com:

The choice between a personal loan and a loan against securities depends on your financial situation and  funding needs. Each type of loan has its own advantages and disadvantages, and the choice should be made based on careful consideration of your requirements.

A loan against securities is a financial product where individuals can use their existing financial assets such as stocks, mutual funds or other securities as collateral to secure a loan from a financial institution or lender. This type of loan allows borrowers to access funds without having to sell their investments. On the other hand, a personal loan is an unsecured loan, making it accessible to a broader range of borrowers. Here are some factors to consider when choosing between the two:

Investment collateral: It requires you to pledge your investments such as stocks or mutual funds as collateral. If you default on the loan, the lender can sell your securities to recover the amount.

Interest rates: These loans typically offer lower interest rates compared to personal loans because they are secured by collateral. The interest rates can vary between 9% and 14%, depending on the lender. If you have valuable securities and can comfortably pledge them without risking your financial stability, a loan against securities may offer lower rates.

Loan amount: Theloan amount is usually determined by the value of the securities you pledge as collateral. It can be a percentage of the total value of the securities, ranging from 50% to 70%. It could be higher in certain cases, depending on the borrower and the lender.

Tenure: Loan against securities often comes with shorter loan tenures compared to personal loans. The repayment tenure offered is between 1 year and 3 years.