Personal loans have evolved as one of the prominent financial tools for Indians. For every small or big need, be it home renovations, or medical emergencies, or going on a trip to educational needs, or marriage expenses, or even to manage some unexpected expenses, people are looking forward to personal loans . But when you start looking at potential loans, one question always arises:

Which loan should you prefer: A Secured Loan, where bank has a collateral or an Unsecured loan, where there is no collateral involved.

 And more importantly Ways you can help your financial situation.And most important of all . . . which one is right for your financial situation?

This guide breaks it all down in the easiest possible egg way – features, differences, benefits, risks, eligibility, and the tips of experts – so you too can make a certain decision on borrowing.

1. What Are Secured-Personal Loan Laws?

A Personal Loan that is Secured A secured personal loan is a loan where you use some item, called security (collateral), as a bond.

This collateral can be:

• Gold
• A house or property
• Fixed deposits
• Securities (Mutual funds, Shares, Bonds)
• Surrender value of the insurance policy
• A car or a two-wheeler

The lender has the right to take over the asset if you fail to repay the loan money. Due to their lower risk, a lower-risk offering from lenders typically includes:

• Lower interest rates
• Higher loan amounts
• Longer tenure options
• Easier Approval with low CIBIL scores

Common examples of secured loan products are gold loans, loan against property, loan against FD and loan against securities.

2. What Are Unsecured Personal Loans?

A personal loan that is not secured does not require collateral.

Your approval is based primarily upon:

• Your income
• Credit score
• Employment stability
• Debt to income ratio
• Banking history

Due to the risk borne by the lender, the interest rate is almost always higher.

However, in OnTasks loans, which are not secured, provide unparalleled convenience:

• Fast approval
• Fully digital process
• Instant disbursal
• No need to pledge any asset

This category includes regular personal loans, which most human beings find the most suitable for fast sources of cash.

3. Potential Distinction Between Secured and Unsecured Loans

Here is a simple comparison so you can more clearly understand both options:

Feature

Secured Loan

Unsecured Loan

Collateral Required?

Yes

No

Interest Rate

Lower

Higher

Loan Amount

Higher

Moderate

Approval Time

Slower

Fast/Instant

Credit Score Dependency

Low

High

Risk to Borrower

High (asset at stake)

Low

Eligibility Criteria

Flexible

Strict

Best For

Large amounts, low CIBIL

Quick & small/medium needs

4. Advantages of Personal Secured Loans

1. Lower Interest Rates

Since the lender is secured by the collateral, mind you, interest rates are way lower in some cases, 50% to 70% lower than unsecured loans.

2. Higher Loan Amounts

If you need 10 Lakh or 20 lakhs or may be even more, secured loans can be used to easily provide high-value financing based on the value of your assets.

3. Flexible Repayment

Tenures go up to 15-20 years (in case of a loan against property).

4. Easy Availability of Loan with Low CIBIL

If your credit score is less than 650, secured loans give you a better chance since the collateral reduces the lender’s risk.

5. Better for Business Owners

Self-employed individuals often find it easier to get secured loans in comparison to unsecured loans.

5. Secured Loans Disadvantages

1. You Risk Losing Your Asset

If you default, the lender can legally take over your property, gold, FD or any pledged asset.

2. Slower Approval

Collateral valuation and documentation are time-consuming.

3. Higher Documentation

You need to give proof of ownership, asset papers, valuation, etc.

4. Not Ideal for Small Expenses

If you just need a loan of 50000-200000 rupees, you may not need a secured loan.

6. Pros of Unsecured Personal Loans

1. No Collateral Required

Your assets are safe – no pledge, no mortgage, no risk.

2. Instant Approval & Constant Disbursal

With digital-first lenders, you receive funds in a few minutes.

3. Minimal Documentation

Usually just:

• Aadhaar
• PAN
• Salary slip or bank account statement.

4. Short Term Credit Exposure

This is widely chased for wedding expenses or  travel requirements, and even for  medical bills and emergencies..

5. Flexible Use

Lenders are not concerned with what you do with the money.

7. Drawbacks of Unsecured Personal Loans

1. Higher Interest Rates

The interest may be higher than other interests because the lender is taking more risks.

2. Strict Eligibility

Your CIBIL score, salary and job stability play a huge role.

3. Smaller Loan Amounts

Typically based on income from 25,000 to 20 lakhs

4. Penalties for Default

Any delay in payments will impact your CIBIL score, and in the case where it is termed as default you may receive a legal notice as well.

8. Which Loan Should You Choose? Secured or Unsecured?

This is up to you entirely and your situation.

 Let’s break it down:

Choose a Secured Loan If…

• You need a large amount (₹10–50 lakh+)
• Your CIBIL score is low
• You prefer lower EMIs
• You want long-term repayment

Engage in regular physical activity and slightly lower your quality of life if you want to be healthy. Engage in regular physical activity to improve your quality of life on the sly if you want to be healthy.

A secured loan is advisable for:

• Home renovation
• Business expansion
• Education
• Medical treatments
• Consolidating large debts

Choose an Unsecured Personal Loan If…

• You need money urgently.
• You want a fully digital process.
• You don’t want to risk your assets.
• You need small to medium financing.
• Your CIBIL score is strong.
• You want simple, fast approval.

Unsecured loans are ideal for:

• Travel
• Wedding expenses
• Emergency needs
• Gadget purchases
• Car repairs
• Short-term financial gaps

9. Cost Comparison: Which Is More Money Saving?

Here’s a simple example:

Secured Loan

Interest rate: 10%

Loan amount: ₹5,00,000

Tenure: 5 years

Total interest: Much lower

Unsecured Loan

Interest rate: 15–24%

Same loan amount and tenure

Total interest: Significantly More

Even saving 5% in interest rate will save you tens of thousands of rupees.

10. Impact on Your Credit Score

Secured Loan Impact

• Being able to make payments on time builds a score
• Default leads to asset seizure + drop in score

Unsecured Loan Impact

• More sensitive about delayed payments
• Among the outcomes of a single missed EMI, RCC is reduced by 50-100)

Regardless of the type, it is the golden rule to pay it on time.

11. Which Lenders Disburse These Loans?

In India, both banks and RBI-registered NBFCs provide secured as well as unsecured loans.

Apps such as CreditMitra, which work with trusted partners regulated by RBI makes it easier by offering:

• Instant eligibility checks
• Digital KYC
• Same-day approval
• Competitive interest rates
• Transparent charges

If being able to use convenience is your priority, then digital-first platforms provide you with a quick experience.

12. Suggestions on how to decide whether to apply for a Secured loan or Unsecured loan

The following pointers will help you understand which loan type is best for you:

1. Evaluate and check your ability to make the monthly payments and then subscribe for the type of loan that keeps the EMIs affordable.

2. Compare the interest rates from lenders

Even a minor difference in the rate is significant.

3. Before making an application, check your CIBIL score

If you score more than 700, you will have better choices.

4. Never pledge an asset if you cannot stand losing it

Especially with the property or investments.

5. Borrow only what you need

Don’t get a high-value secured loan because it’s available.

6. Verify lender credibility

Always opt for the lenders regulated by the Reserve Bank of India.

13. Final Verdict Secured vs Unsecured, What Is Better?

There is no “best” choice – only the loan that is best for your financial goals. Individuals should take unsecured personal loans when:

Urgent needs

Small to medium loan amounts

Fast approvals

People who have good credit scores

Secured loans are best for:

1. Large expenses
2. Low CIBIL score borrowers
3. Lower interest expectation
4. Long-term financing

If you do not care about security and you want speed and convenience –> choose unsecured.

If you want low cost ana d high amount of loan.

Platforms such as CreditMitra help you compare both options instantaneously so that you can get the best deal according to your income, profile and requirements.