Loans · Secured loans compared — LTV, rate, tax, foreclosure side-by-side
Loan Against Property / MF / Shares / Gold / PPF
When you need ₹5L-1Cr fast, you have FIVE major secured loan options: Property (LAP), Mutual Funds (LAMF), Shares (LAS), Gold, or PPF/FD. Each has different Loan-to-Value (LTV) ratios, interest rates (8.5%-15%), tax treatment, prepayment rules, and risk profiles. Most borrowers default to personal loan (12-18%) because they do not know about these cheaper secured alternatives. This page compares all 5 head-to-head with real numbers + when each makes sense.
Who needs this
Anyone needing ₹2L-50L+ for business expansion, medical emergency, home renovation, child's higher education, or short-term liquidity. Asset-owners (property, MF, shares, gold, PPF/FD) who do not want to sell. Anyone exploring alternatives to high-cost personal loans. Business owners managing working capital.
Key decisions
- Q1
What is the LTV (Loan-to-Value) for each option — and what does it really mean?
LOAN-TO-VALUE = loan amount / collateral market value. Higher LTV = more loan from same asset. (1) LOAN AGAINST PROPERTY (LAP): 60-80% LTV. ₹1Cr property = ₹60-80L loan. Highest absolute amount among secured loans. (2) LOAN AGAINST MUTUAL FUNDS (LAMF): 50-80% LTV for equity MFs; 80-90% for debt MFs. ₹10L equity MF = ₹5-8L loan. (3) LOAN AGAINST SHARES (LAS): 50% LTV for actively-traded large-cap; 30-50% for mid/small-cap. ₹10L shares = ₹3-5L loan. SEBI cap. (4) GOLD LOAN: 75% LTV (RBI cap, raised from 60-70% historical). ₹5L gold = ₹3.75L loan. (5) LOAN AGAINST PPF / FD: 75-90% of FD value; 25% of PPF balance after year 3 (PPF cap is restrictive). PRACTICAL IMPLICATION: LTV determines whether you can raise the amount you need. ₹50L need + ₹40L gold = can only raise ₹30L from gold (75% LTV) — pair with another loan. Pre-pandemic, gold LTV was 60-70%; post-RBI 2020 reform raised to 90% but settled at 75% currently.
- Q2
Interest rate comparison + which is genuinely cheapest?
TYPICAL RATES (FY 25-26). (1) LAP: 8.5-12% p.a. (close to home loan rate; ranges by bank/profile). (2) LAMF: 9-13% (NBFC + bank rates; debt MF rates lower than equity MF). (3) LAS: 10-15% (highest among 5 due to market volatility risk; SEBI-regulated). (4) GOLD LOAN: 9-15% from banks; 12-24% from NBFCs (Muthoot/Manappuram). (5) LOAN AGAINST PPF: PPF interest + 1% = ~8% (cheapest!); FD-backed loan: FD interest + 1-2% = ~7-9% (also very cheap). CHEAPEST = LOAN AGAINST PPF / FD by structure (your own asset + 1-2% spread). HIGHEST = LAS / NBFC gold loan. PERSONAL LOAN BENCHMARK: 11-18% unsecured. So even the most expensive secured option (LAS ~15%) is comparable to mid-range personal loans, with the upside that your asset is collateral (lower risk to lender, sometimes lower rate negotiable).
- Q3
Tax treatment — which is most tax-efficient?
INTEREST PAID is not directly deductible for most secured loans (unlike home loan Section 24(b)). HOWEVER, end-use matters. (1) LAP for BUSINESS use: interest is deductible as business expense under Section 37(1). (2) LAP for HOME purchase / construction: interest deductible under Section 24(b) up to ₹2L/year (treated as home loan). (3) LAP for personal consumption: NO deduction. (4) LAMF: interest typically not deductible unless investment use (rare). (5) LAS: investment-purpose interest deductible against capital gains. (6) GOLD LOAN: personal use = no deduction; business use = Section 37(1). (7) LOAN AGAINST PPF: PPF interest continues accruing on the un-borrowed portion + you cannot claim 80C on PPF deposits during loan tenure (PPF account treated as collateral). (8) LOAN AGAINST FD: FD interest continues accruing + taxed at slab rate; loan interest not deductible. KEY INSIGHT: end-use determines deductibility, not loan type. Document end-use carefully — auditors check.
- Q4
Foreclosure / prepayment rules + which is most flexible?
PER RBI 2014 + 2019 + bank policy. (1) LAP: FLOATING-RATE individual: ZERO penalty (per RBI 2014 floating-rate rule). FIXED-RATE: 2-5% of outstanding. (2) LAMF: typically zero penalty (treated as overdraft facility — pay back any time). Some NBFCs charge 1-2% if foreclosed within 6 months. (3) LAS: zero penalty typical; bank may insist on min retention period (3-6 months) to recover processing. (4) GOLD LOAN: zero penalty typical; some NBFCs charge 1-2% on first-3-month foreclosure. (5) LOAN AGAINST PPF / FD: zero penalty (you are essentially borrowing your own money). MOST FLEXIBLE: LAMF + LAS + LOAN AGAINST PPF/FD — typically overdraft-style with full flexibility. LEAST FLEXIBLE: LAP if fixed-rate (rare these days); legacy gold loan products with lock-in. PRACTICAL: most modern secured loans (post-2020) are floating + zero-penalty for individuals. Verify in sanction letter; cite RBI circular if pushed back. See /loans/prepayment-rights-india for full RBI framework.
- Q5
When does each secured loan WIN — practical scenarios?
LAP WINS: large amount needed (₹25L-2Cr+), long tenure (10-15 years), business expansion or home renovation. Property values appreciate, so collateral is robust. Best for HNI + business owners. LAMF WINS: need ₹5-15L for 6-24 months, equity MF portfolio sitting idle, do not want to disrupt long-term SIP. Overdraft structure means pay-as-you-go interest. LAS WINS: traders + business owners needing working capital with concentrated equity portfolios. Quick disbursal (1-3 days). GOLD LOAN WINS: emergency cash (24-48 hr disbursal), short-term need (3-12 months), Tier-2/3 city where bank loans take days. Rural India staple. LOAN AGAINST PPF/FD WINS: cheapest cost, lowest paperwork, ideal for 6-24 month bridge needs. Drawback: PPF cap is restrictive (25% after year 3). PERSONAL LOAN WINS: no collateral available, small amount (₹50K-5L), short tenure (6-36 months), urgent need. Generally most expensive — use only when secured options unavailable. RULE: always check 3 secured options before defaulting to personal loan; potential savings ₹50K-5L over loan tenure.
Top lenders ranked by relevance
| Lender | Rate / Terms | Note |
|---|---|---|
| HDFC Bank (LAP / LAMF) | 8.5-12% p.a. | Largest LAP book + competitive LAMF rates; quick digital application. |
| ICICI Bank (all 5 types) | 9-13% p.a. | Strong end-to-end offering across LAP/LAMF/LAS/Gold/FD; iMobile integration. |
| Muthoot Finance (Gold) | 12-18% p.a. | Largest gold-loan NBFC; 24-hour disbursal; wide rural network. |
| Bajaj Finserv (LAP / LAS) | 9-14% p.a. | Quick approval + high LTV on LAP; competitive LAS for traders. |
| SBI (FD-backed + PPF loan) | FD+1-2% / 8% PPF loan | Cheapest secured loan options; minimal paperwork; trusted PSU. |
Source: bank rate cards · FY 25-26 · refreshed monthly
RBI rules + scheme specifics
- RBI Gold Loan LTV cap: 75% of gold market value (raised from 60-70% historical; settled at 75% post-2020).
- SEBI Loan Against Securities (LAS) framework: 50% LTV for large-cap, 30-50% for mid/small-cap.
- RBI Prepayment Rule (2014): floating-rate LAP to individuals — zero penalty.
- PPF Loan: available from year 3 to year 6; max 25% of balance at end of year preceding loan application.
- FD Loan / Overdraft: typically 75-90% of FD value; rate = FD interest + 1-2% spread.
- Section 24(b): LAP for home purchase/construction qualifies for ₹2L interest deduction; other end-use does not.
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