In today’s dynamic financial landscape, individuals and businesses in India often seek quick funds for various purposes. One common choice is a Rs. 35000 loan, which can be acquired through secured or unsecured means. While unsecured loans are popular for their simplicity, a secured loan option, such as a loan against securities, often presents significant advantages. Understanding why a Rs. 35000 loan secured by assets can be better than an unsecured option is crucial for making informed financial decisions.
Understanding the difference between secured and unsecured loans
A secured loan requires collateral, such as shares, mutual funds, or other securities, against which the loan is sanctioned. In contrast, unsecured loans are granted based solely on creditworthiness without any asset backing.
Secured loans, including those against securities, generally offer:
- Lower interest rates
- Higher loan amounts relative to income
- Flexible repayment options
Unsecured loans, meanwhile, come at higher interest rates due to increased risk for lenders and usually have strict eligibility criteria.
Benefits of choosing a Rs. 35000 loan against securities
Here are the benefits of choosing a Rs. 35000 loan against securities:
Lower interest rates and cost-effectiveness
A major benefit of opting for a Rs. 35000 loan against securities is the lower interest rate compared to unsecured loans. Since the loan is backed by an asset, lenders perceive reduced risk and pass on the benefit to the borrower. Indian banks and NBFCs typically offer interest rates on secured loans that can be 2-4% lower than unsecured options.
Faster approval and disbursal
Using securities as collateral expedites the loan approval process. The lender’s evaluation mainly focuses on the pledged asset’s value rather than an extensive credit assessment. This results in quick disbursal, making a Rs. 35000 loan more accessible when funds are urgent.
Higher eligibility and loan amounts
With securities as collateral, borrowers often get access to higher loan amounts, even crossing Rs. 35000, depending on the asset value. Conversely, unsecured loans may limit the quantum of borrowing, especially for individuals with average credit scores.
Reduced risk of over-indebtedness
Since the loan amount is linked to the value of pledged securities, borrowers tend to take only what they need. This reduces the likelihood of borrowing beyond repayment capacity, a common risk with unsecured loans.
Suitable uses for a Rs. 35000 loan against securities
Individuals can use this loan amount for many short-term financial needs, such as:
- Paying emergency medical bills
- Managing sudden household expenses
- Investing in business working capital
- Meeting educational costs
Opting for a loan against securities prevents disruption of liquid investments while accessing affordable credit.
Important considerations before choosing a loan against securities
Here are a few important considerations before choosing a loan against securities:
Valuation of securities
The value of securities affects loan eligibility. Lenders usually finance 50-70% of the market value, depending on volatility and asset type. Understanding the exact loan-to-value ratio is important.
Risk of asset liquidation
In case of default, lenders may liquidate pledged securities to recover dues. Borrowers should ensure disciplined repayment to safeguard their assets.
Impact on portfolio
Pledging securities might restrict the ability to sell or trade them during the loan tenure. Evaluate if this aligns with your investment goals.
Comparing unsecured loan downsides with secured options
Unsecured loans, while convenient, have higher interest rates, stringent eligibility, and limited borrowing powers. Delays in approval and high EMIs can strain finances. In contrast, a Rs. 35000 loan against securities mitigates these issues with better terms and enhanced flexibility.
Conclusion
For Indian borrowers, a Rs. 35000 loan against securities presents a financially prudent alternative to unsecured loans. Lower interest rates, faster approvals, and higher loan amounts make it an ideal option for managing short-term funding needs. While understanding related risks and asset valuation is necessary, the secured route often leads to cost-effective borrowing. Therefore, considering a Rs. 35000 loan backed by securities can optimise your financial strategy compared to unsecured borrowing choices.
For more insights on loans against securities and their benefits, explore related topics on personal finance and credit management.
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