When you are in the urgent need of cash, the easiest option which seems to the borrower is taking a personal loan. But with the raging of the interest rates these days, it may not be wise for the person to get into the vicious cycle of debt. However, the bank tends to look at the entire financial profile before they accept the borrower for eligibility. What if the borrower has an option apart from the personal loan in times of crisis?

Alternatives of Personal Loan

Loan against fixed deposits

  • Loan against fixed deposit is the quickest possible loan because the bank lends money against the fixed deposits.
  • The settlements of this type of loan should be done within the fixed deposit tenure.
  • The biggest advantage is that the minimal documentation is required and the loans are available over 80% of the fixed deposit value.
  • Also, the fixed deposit continues to earn interest even during the tenure of the loan.
  • However, the borrower must discipline himself to repay the loan every month like an EMI.

Gold loan

  • Initially, it started as a popular source of finance in the rural and semi-urban areas, gold loans thus have off late become extremely popular in the metro cities as well.
  • This type of loan thus provides immediate liquidity against jewelry without selling them.
  • Further, there are no processing charges and prepayment fees.
  • The gold loan amount always depends on the purity and the weight of the gold that is given.
  • Although this loan does not go through the previous credit history, banks are going stringent on these after the recent RBI regulations.

Loan against Property

  • A borrower can borrow against his property and thus the loan amount is also calculated based on the value of the property and the borrower’s capacity to repay.
  • Refinancing the property is thus an option if the value of the loan is to be increased or the property value has however risen over a span of time.
  • Failure in prompt repayment can also result in the loss of ownership. Hence, absolute care is taken, as a property is usually of a higher value than any other form of security. A borrower can take the Loan against Property

Loan against shares

  • Banks can give the loan against the shares of the specific companies which he holds.
  • However, not all shares which the borrower holds qualify for such kind of loans.
  • Each bank has a different list of approved securities which can qualify for such loans.
  • The amount depends upon the valuation of security and the ability to repay and to service the loan.

Loans against Life Insurance policies

  • Loans that are granted based on life insurance deals with lower rates of interest and they are also easy options for repayment.
  • The loan amount depends on the value of the policy which can be paid at any time during the term of the policy.
  • The interest shall be deducted if there is a default in the payment of the loan amount.

Loan against Public Provident Fund (PPF)

  • Loans can be taken based on PPF but with the tenure which is only up to 2 years.
  • The borrower is entitled to another loan if they are thus within 3 to 6 years of opening an account.
  • The borrower can borrow without breaking the  PPF and also with the minimum documents.

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