Are personal loans secured or unsecured? Here’s what you should know | Mint

A rising number of borrowers in the country are opting for personal loans, amid high consumption demand and rapidly evolving liquidity conditions. Even according to the latest sectoral deployment of bank credit report of April 2025 by RBI, loans to the personal segment that includes credit card dues, housing, education along with other loans have maintained a reasonably steady growth trajectory.

Still, it has been seen that many borrowers remain unclear and uncertain about the conceptual difference between secured and unsecured personal loans.

What are personal loans?

Personal loans are generally unsecured in nature i.e., they are not backed by collateral like gold loans or property loans. In stark contrast, secured personal loans need the borrower to definitely pledge an asset.

Assets such as fixed deposits, vehicles, or even jewellery and ornaments are pledged as collateral. The secured personal loans are extended to borrowers with low or limited credit history often at lower interest rates. As the risk of the lender is reduced immensely due to the provided collateral.

Note: The features of secured and unsecured loans discussed above are illustrative in nature. For the updated terms, conditions and features on an individual basis refer to the official website of your respective lender.

Regulatory and market context

As per RBI guidelines all regulated lenders must ensure transparency in the terms of a loan, its requirements and eligibility including whether the loan product is secured or unsecured in nature on their respective websites and in customer agreement documents as well.

To meet the same guidelines, prominent NBFCs such as Bajaj Finance and banks such as HDFC Bank, ICICI Bank among others do provide detailed product disclosures to apprise the aspirational applicants about the pros, cons along with related terms and conditions of any particular loan product. So that they i.e., the aspirational borrowers can make an informed decision.

Further, in case of unsecured personal loans borrowers are suggested to regularly check their credit scores through authorised bureaus such as CIBIL, CRIF High Mark, Equifax among others before applying.

Calm and careful comparison of EMIs, interest rates and documentation requirements across distinct lenders is also a prudent way to move ahead while considering different kinds of credit lines.

Hence, with the RBI likely to cut repo rate by 25 basis points in its upcoming June 6 meeting, retail lending is expected to remain stable in the near term. That is why personal loans in both forms will continue to play a crucial role in bridging temporary financial gaps for millions across the country. Therefore, one should apply for new loans after properly considering these essential points.

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