| Overview: A secured personal loan requires collateral, such as gold or property, offering lower interest rates and higher amounts than unsecured loans. This guide explains when secured personal loans make financial sense, their benefits and risks, and how they compare to unsecured alternatives for Indian borrowers. |
Understanding Secured Personal Loans in India
Over 40% of Indian borrowers with low credit scores opt for secured loans to improve their approval odds. When you need funds but face high interest rates or loan rejections, understanding the options of secured loans in personal loans becomes crucial. A secured personal loan requires you to pledge an asset as collateral, which can significantly reduce your borrowing costs and increase your chances of approval.
This approach has gained popularity as personal loans in India grew over 25% year-on-year in 2024, with many borrowers seeking cost-effective alternatives to traditional unsecured lending.
What Makes a Secured Personal Loan Different
A secured loan in a personal loan means you pledge an asset—like gold, property, or fixed deposits—as collateral against the borrowed amount. Unlike unsecured loans that rely solely on your creditworthiness, secured loans reduce the lender’s risk through tangible security.
The process works straightforwardly: you apply for the loan, the lender evaluates your pledged asset, sanctions the loan amount (typically 70–90% of asset value), disburses funds, and holds the asset until full repayment. If you default, the lender can legally sell the asset to recover dues.
This structure benefits both parties—you get better loan terms, while lenders face reduced risk exposure.
When Secured Personal Loans Make Financial Sense
Secured personal loans sometimes make financial sense for both the borrower and the lender.
Large Funding Requirements
Choose secured personal loans when you need amounts exceeding ₹5 lakh. While unsecured options like personal loan products offer up to ₹9 lakh, secured loans can provide higher amounts based on your asset value.
Low Credit Score Situations
If your credit score falls below 650, secured loans offer better approval chances. The collateral compensates for credit weaknesses, making lenders more comfortable with the risk.
Long-Term Repayment Needs
For expenses like home renovation or business expansion, secured loans provide longer tenures (up to 7 years) with manageable EMIs. This flexibility helps maintain cash flow while meeting large financial commitments. You can download the Airtel Thanks app to calculate your EMI easily.
| Did You Know? Secured loans in India typically offer interest rates 2–5 percentage points lower than unsecured personal loans, making them cost-effective for large, planned expenses. |
Comparing Secured vs Unsecured Personal Loan Options
| Feature | Secured personal loan | Unsecured personal loan |
| Collateral required | Yes (gold, property, FD) | No |
| Loan amount | Up to 90% of asset value | Based on income/credit score |
| Interest rates | Generally 2–5% lower | Higher rates |
| Processing time | Longer (asset valuation) | Faster (digital approval) |
| Risk to borrower | Asset loss on default | Only credit score impact |
| Approval chances | Higher, even with low scores | Credit score dependent |
But remember, secured loans require asset evaluation and documentation, making them slower than instant digital alternatives. The emotional stress of pledging valuable assets also weighs on many borrowers.
In a Nutshell
A secured loan in a personal loan provides lower interest rates and higher amounts by using your assets as security. They work best for large, planned expenses when you have a stable income and want to minimise borrowing costs. However, the risk of asset loss and longer processing times make unsecured alternatives attractive for urgent needs or risk-averse borrowers. Evaluate your credit score, funding requirements, and risk tolerance on Airtel Finance before choosing between secured and unsecured personal loan options.
FAQs
1. What exactly is a secured personal loan?
A secured personal loan requires pledging assets like gold, property, or FDs as collateral, offering lower interest rates and higher amounts than unsecured loans.
2. When should I choose secured over unsecured personal loans?
Choose secured loans for large amounts (₹5 lakh+), low credit scores, or when you want lower EMIs with longer repayment tenure.
3. Can I get secured personal loans with a poor credit history?
Yes, secured loans are easier to obtain with poor credit because collateral reduces lender risk, though better scores still improve terms.
4. What happens if I default on a secured personal loan?
The lender can legally seize and sell your pledged asset to recover outstanding dues after sending payment reminders and notices.
5. Are there alternatives to a secured loan in personal loan borrowing?
Yes, unsecured personal loans offer instant approval without collateral risk, though with higher interest rates and stricter eligibility requirements.
