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’s thus not quite wise for the person to get into the vicious cycle of debt. Banks also, however, tend 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 the times of crisis?
Here are thus some quick fixes as an alternative to the personal loans –
- Loan against fixed deposits – This is thus the quickest possible loan because the banks lend against their own fixed deposits. The settlements of this type of loan should thus be done within the fixed deposit tenure. The biggest advantage which is there Is that minimal documentation is required and the loans are available over 80% of the fixed deposit value. Also, the fixed deposit continues to earn an 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 off as a popular source of finance in the rural and semi-urban areas, gold loans thus have off late become extremely popular in the metros as well. This type of loan thus provides immediate liquidity on the basis of one’s jewelry without having to sell it away. Further, there are also no processing charges and the prepayment fees. The loan amount always depends on the purity and the weight of the gold that is given. Although this loan does not to necessitate the previous credit history, banks are thus going stringent on these after the recent RBI regulations. Further, the interest is also not cheap and it is comparable with the personal loans.
- Loan against Property – Borrower can borrow against his property and thus the loan amount is also calculated on the basis of 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, and hence absolute care must, however, be taken, as a property is thus usually of the higher value than any other form of security.
- Loan against shares – Banks thus lend 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 thus has a different list of the approved securities which can qualify for such loans. The amount thus 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 on the basis of the life insurance deals have lower rates of interest and they are also easy options for the purpose of repayment. The loan amount depends on the value of the policy which can be paid 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 also be taken on the basis of PPF but with the tenure which is only up to 2 years. If the first loan is thus repaid, the borrower is thus entitled to another loan if they are thus within 3 to 6 years of opening an account. The benefit of this loan is that the borrower can borrow without breaking the PPF and also with the minimum documents.