Personal Loan Primers

Personal Loan or Loan against Security

Friday,23rd November 2007

Loan against security/jewellery is an easy-to-use overdraft facility up to Rs. 20 lakh granted against approved shares and mutual funds owned either by you (the borrower) or your immediate relatives (third party pledgers). The shares should be in the dematerialized (demat) form. Banks and financial institutions also accept physical shares subject to you dematerialising them through a depository account with them. Only after your shares get dematerialised will you get the overdraft limit.

Now you have to decide whether you should go for the personal loan or loan against security. We have made a comparison between personal loan and loan against security.

Personal loan	Loan against Security/Jewellery
It is an unsecured loan.	It is a secured loan.
Stable loan	Unstable because if the value of shares dip in the stock market, you will need to bring in margin money to prevent the bank from selling your shares.
No security, guarantor, or collateral needed for personal loan.	Your shares and debentures are the security for your loan.
Your can borrow up to 10 lakh if your income can handle the EMI payments.	You can borrow around 40-60 percent of the value of the shares, with an upper cap of Rs 20 lakh if the security is equity shares.
Higher rate of interest.	Lower rate of interest

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