Hello Readers!!
There come many instances in our life when we run out of handy cash to carry out any specific event, be it your child’s admission to college, or be it building your house or others. At that time what alternate we are left with is taking a loan. However due to high interest on education loans or personal loans people often feel dilemmatic whether they should go with the option or not!!
Well, you do not need to worry about such situations, as there are several other loan options that help you raise funds for your needs. Secured loans allow borrowers to raise funds without selling their assets or compromising on crucial financial goals. These loans hold lower credit risk for lenders as they have the option to sell the pledged securities in the event of a payment default.
Also, these low credit risk loans help borrowers to take a more relaxed approach to their credit score, and levies very low-interest rates than compared to those unsecured personal loans.
Let us have a look at these efficient loan options.
Loan Against Securities!
Yes! Loan against your securities, you could avail these at times if you run out of cash. Loan against securities is offered against the bonds you hold, against your units in mutual fund investment, or against your shares in the share market. The borrower would continue to receive interest, dividends, bonuses, etc. on the pledged securities, during the loan tenure. Here in this case the loan amount to be sanctioned depends on the lender’s risk assessment of the securities pledged as collateral, subject to the cap on the LTV ratio assigned by the RBI for securities.
A loan against securities is offered in the form of an overdraft facility. Here the borrower has options, either they can withdraw all the amount sanctioned in the loan or they can withdraw part of it as per his requirement. The interest component of the loan against securities is charged on the amount withdrawn till its repayment.
In case people take a loan against the security they hold, they have to service the interest component every month, however for their principal amount, they are free to repay as per their cash flows during the tenure of overdraft facility, that too without any prepayment charges. These two facilities make these types of loans more convenient and comfortable to investors.
Well, the loan against securities works the different way in the case in case of any fall in the market value of the securities considered as collateral. The fall in the market value of the security acting as collateral results in breaching the regulatory caps on LTV ratios. In that seen the borrower would be required to meet the LTV ratios either by pledging more units of their security as collateral or by depositing cash equivalent, with the lender.
Gold Loans!!
Yes! Gold loan is another efficient loan option that you can avail yourself of in times when you run out of cash. The prominent benefit of taking a gold loan is that the lender mostly sanctions the loan amount on the same day the application is submitted. The repayment tenure of gold loans is usually three, however, if your lender is soft heart he can also offer longer tenure of 4-5 years.
The loan amount to be sanctioned in gold loans depends on the value of the gold you have decided to use as collateral and the sanctioned LTV ratio, subject to the regulatory cap of gold LTV ratios given by the RBI.
The repayment option of gold loans makes them stand unique from other kinds of loans. Usually, the repayment method opt by the borrower of gold loan is the usual EMI mode, however, there are many lenders that offer bullet repayment or allow borrowers to repay the interest amount before and then settle down the principal amount at the end of the loan tenure.
Loan Against Property!
The third efficient loan option is a loan against property you hold, like residential, commercial, and industrial properties. The loan amount to be sanctioned in this loan can be range from 50-70 percent of the property’s market value, arrived at by the lenders. The repayment period for this loan is usually around 15 years that can also be extended up to 20 years depending on the lender.
This loan option is the best choice for those who need a big loan amount with long-term repayment tenure. However, this loan option would not recommendable to those who need the loan amount quickly as the disbursals of this loan take time, around 2-3 weeks, because of some lengthy process.
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For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).