In this sunny season of vacations, shopping and enjoyment, do not plunge into the this trap- “Personal loan“. If you think you do not have the sufficient funds to finance your big purchases, then instead of taking personal loans, there are other better and cheaper ways by which your funds’ issue can be sorted out.
Pledge gold:
There maybe many pawn brokers in your neighbourhood that provide you with this facility of pledging gold and availing a loan of 75-80% of the amount. This process involves lesser paper work and you can get your amount in a couple of hours’ time.
Loan against your Policy :
This option is generally available against policies which accumulate cash values like the endowment plans,where the loan value depends upon the surrender value that the policy is entitled to at that point of time. The loan amount is decided depending upon the number of premiums paid, higher the premiums paid, higher will be the loan amount, but with varying interest rates depending upon the loan against policy of the financial institutions.For example, LIC offers half yearly interest of 9% and State bank of Mysore offers at 12%. The amount of the loan can either be deducted by repaying the loan + interest or just pay the interest and let the principle be deducted form the policy.
Avail a PPF(Public provident fund)
PPF is a kind of retirement saving and any loan should be taken only in case of emergency or urgent requirement. You can take 25% from you PPF account between the third and the sixth year from any SBI branch, whose repayment is done in 36 installments where you pay 1% interest monthly. During situation of non-repayment, 6% interest is charged on the whole outstanding amount per month.The interest has to be paid in not more than two instalments after the loan amount is fully repaid. You can also avail of a second loan if the first one is fully repaid.
Mutual Funds
During the times of crucial requirements, you can pledge your Mutual Funds with the banks depending on whether the have this particular scheme available or not. The process generally, starts with the marking of the Mutual fund units with lien, so that you cannot redeem these until you have cleared the debt. This is followed if the loaner partially or fully pledges the units. This will enable you to raise at least 90% of loan from the value.
Equities
Loan against shares is like an overdraft facility. Some banks, however, also provide term loans against shares. While the Reserve Bank of India (RBI) allows banks to lend up to 75% of the value of demat shares and 50% of the value of physical shares, this limit varies across banks. The shares are revalued weekly and, accordingly, the drawing power is revised.
FDs(Fixed Deposits)
Instead of bearing the penalty charges by breaking your FDs you can avail 90% of the amount over your FD as loan. Generally, these loans carry 1%-2% more than the interest you receive you on it. The repayment can be done by holding the FD till maturity or you can even pay it earlier. If in case, you fail to pay the loan amount then it will be adjusted to the FD amount at the time of maturity.
NSC(National Savings Certificate) & KVPs( Kisan Vikas Certificate):
These saving schemes are generally accepted by private sector banks and offer loans against them. But usually, availing loans against such savings takes 2-3 days processing time because they are sent for a verification process since the banks do not issue them. The loan amount provided against these savings certificates varies from bank to bank but the interest is charged at base rate.
Always remember opt for these options only when there is a dire need of arranging funds for emergency purposes. Also, do make a plan as to how you want to spend these funds so that you avoid any kind of misuse and make judicious use of it.