How to Convert Your Personal Loan into a Secured Loan for Lower Interest


A personal loan offers financial freedom when you need it the most—whether for emergencies, education, weddings, or even a vacation. It’s quick, requires minimal paperwork, and doesn’t demand any collateral. But what it offers in convenience, it often takes back in the form of higher interest rates. This can put pressure on your monthly budget, especially if you’re juggling multiple financial responsibilities.

But here’s the good news: If you’re currently paying off a personal loan, you may have the option to convert it into a secured loan. This smart financial strategy can significantly reduce your interest rate, resulting in lower EMIs and better long-term savings.

In this article, we’ll walk you through how to convert your personal loan into a secured loan, why it can be beneficial, and what steps you need to follow.

What Is a Personal Loan?

A personal loan is an unsecured loan that doesn't require you to pledge any collateral. It’s typically granted based on your income, credit score, employment stability, and overall financial profile. Due to the unsecured nature of personal loans, lenders charge higher interest rates to mitigate the risk.

In India, personal loan interest rates can range from 10% to 24% depending on the lender and your creditworthiness. While they are easy to get, the long-term cost can be significant if the interest is high.

What Is a Secured Loan?

A secured loan requires you to pledge an asset—such as property, gold, or fixed deposits—as collateral. Since there’s less risk for the lender, these loans come with lower interest rates, flexible repayment options, and larger loan amounts.

If you're currently repaying a personal loan at a high interest rate, converting it into a secured loan can help you save on interest and reduce your monthly EMI burden.

Why Convert a Personal Loan into a Secured Loan?

Let’s take a closer look at why converting a personal loan into a secured loan is a financially sound move:

1. Lower Interest Rates

Secured loans offer better rates because the lender has collateral to fall back on. You can expect to save a significant amount over the loan tenure by reducing your interest rate.

2. Reduced Monthly EMIs

Lower interest means smaller EMIs. This gives you greater breathing room in your monthly budget and reduces financial stress.

3. Extended Repayment Tenure

Secured loans often offer longer tenures compared to personal loans, giving you more time to repay the amount comfortably.

4. Better Credit Score

If you use a secured loan to prepay or consolidate your existing personal loan, and maintain timely payments, your credit score improves.

How to Convert Your Personal Loan into a Secured Loan

Although there’s no direct “conversion” of a personal loan into a secured loan, you can achieve the same outcome by using the funds from a secured loan to repay your personal loan. Here’s how:

Step 1: Assess Your Existing Personal Loan

  • Check the outstanding balance, current interest rate, and remaining tenure.

  • Verify if your personal loan has prepayment or foreclosure charges.

Step 2: Identify an Asset for Collateral

To take a secured loan, you’ll need to offer collateral. Here are a few common options:

  • Loan Against Property (LAP): Use residential or commercial property as security.

  • Gold Loan: Pledge your gold jewellery or coins.

  • Loan Against Fixed Deposit (FD): Use your FD as collateral.

  • Loan Against Insurance or Mutual Funds: Some lenders offer loans against financial investments.

Step 3: Apply for a Secured Loan

Choose the secured loan that best matches your requirements:

  • Compare interest rates, processing fees, and repayment terms.

  • Ensure the loan amount covers your existing personal loan dues.

Submit the necessary documents such as identity proof, address proof, collateral documents, and bank statements.

Step 4: Use the Secured Loan to Repay the Personal Loan

Once your secured loan is disbursed:

  • Repay your existing personal loan in full.

  • Obtain a No Dues Certificate (NOC) and ensure your personal loan account is closed.

  • Begin repaying your new secured loan at a lower interest rate.

Real-Life Example: A Quick Comparison

Let’s say you have a ₹5 lakh personal loan at 16% interest for 4 years. Your EMI would be approximately ₹14,200, and the total interest paid would be over ₹1.8 lakh.

Now, let’s assume you convert this to a secured loan (using a gold loan or property loan) at 10% interest. Your EMI would reduce to ₹12,650, and you’d save around ₹75,000 in interest over the loan period.

That’s a significant saving just by making a strategic shift!

Things to Consider Before Conversion

Converting a personal loan into a secured loan makes financial sense, but there are a few important factors to consider:

➤ Collateral Risk

You’re putting an asset on the line. In case of non-repayment, the lender can seize your asset.

➤ Processing Time

Secured loans, especially property loans, may take longer to process due to valuation and legal checks.

➤ Prepayment Charges

Some personal loans have foreclosure penalties. Check these before making the switch.

When Should You Consider Conversion?

  • You’re paying high interest on your current personal loan

  • Your EMI is straining your budget

  • You now have an asset that can be pledged

  • Your credit score is low, and you're struggling with approvals for new loans

If the above points sound like your situation, converting your personal loan into a secured loan might be your best option.

Alternatives to Consider

Besides a secured loan, here are some alternatives to reduce your personal loan interest burden:

  • Balance Transfer to Lower-Rate Lenders

  • Negotiate with Your Current Lender

  • Consolidate Multiple Loans

  • Make Partial Prepayments Regularly

But among all, converting to a secured loan provides one of the best interest-saving options if you have collateral to offer.

Final Thoughts

A personal loan may have helped you during a time of need, but continuing with a high-interest rate doesn’t always make long-term sense. If you now have access to an asset like gold, property, or an FD, using it to convert your personal loan into a secured loan can save you a lot of money.

Lower interest, flexible tenures, and manageable EMIs make secured loans a viable alternative. Just make sure to evaluate the pros and cons, understand the risk of pledging assets, and choose a reputed lender.

At Fincrif, we simplify your loan journey—whether it’s comparing the best secured loan offers, understanding conversion strategies, or getting expert financial tips. Visit www.fincrif.com to take control of your financial future with smarter, low-cost borrowing solutions.

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