Secured Loans

Why Secured Loans Matter

Secured loans are less risky for lenders. This allows borrowers to get better terms. They can enjoy lower EMIs, longer repayment periods of up to 20 years, and tax benefits. For instance, Section 80C deductions apply to home loans. These loans are great for big expenses like buying a home, expanding a business, or paying for higher education. Limitations of secured loans.

Limitations of Secured Loans

While secured loans offer favourable conditions, they come with risks. Defaulting can result in the lender taking the collateral. This might mean foreclosure on property. It can also lead to a big drop in credit scores, often over 100 points. Loan amounts depend on the value of the pledged asset. Processing takes 7 to 15 days, which makes these loans less suitable for urgent needs. Practical Tips for Managing Secured Loans

Practical Tips for Managing Secured Loans

To ensure smooth repayment, borrowers should allocate only 30–40% of their income to EMIs, reducing financial strain. Setting up auto-debit for payments helps avoid late fees, which typically range from 2–3% of the EMI. Making prepayments whenever possible can significantly cut interest costs—for instance, an extra ₹10,000 per year on a ₹5 lakh loan can save ₹1.2 lakh over five years. Refinancing high-interest debt, such as credit card balances at 24–36% p.a., into a secured loan at 12–15% p.a. can also ease the debt burden. Lastly, reviewing loan terms carefully, including prepayment penalties and insurance coverage for the collateral, can prevent costly surprises.

Secured loans offer a smart and affordable way to cover big expenses. However, to enjoy their benefits, it is important to plan your finances and repay responsibly. This helps reduce risks.