In India, we have different types of loans provided by the banks and financial institutions to meet different requirements. There are loans for marriage, home renovation, etc. The point here is which one to use and when. Here are different types of loans which can be availed other then personal loan.
Basically, there are two kinds of loans, one is Secured Loan and other is Unsecured Loan. In Secured Loan, one needs to keep asset as collateral so that in case of default the bank or financial institution can liquidate the asset and get money back. Such type of loan carry low interest rate when compared to unsecured loan or personal loan.
In Unsecured Loan, you end up paying heavy interest rates as there are more chances of default. Banks and FI can no way to get back that loan.
One should consider other avenues before availing loan, as these loans are processed much faster and one can get better interest rates compared to personal loan.
Here are few other kinds of loan which can be availed against your investment:
Loan against Gold
Gold loan doesn't require many documents, only few documents such as ID proof and address proof is enough. Gold loan interest rates are lower as compared to personal loans and this is probably the edge. Processing fees are not charged in gold loan.
Click to know why gold loan is better then personal loan. However, they are charged fro valuation of gold. Most of the banks and companies take utmost care not to damage the ornaments during evaluation or storage Gold loans are clearly favourite amongst all the other type of loans as they are easy and quick to avail and can be sanctioned in a few minutes. Click to know how to take gold loan?
Loan against Fixed deposits
One can always look upto fixed deposits, when in need for money. Banks charge high interest rate on personal loan between 16-25% depending on the bank and the loan amount. Also, it comes with some percentage of processing fee. Where as, loan against fixed deposit will be around 11%-12%. Hence it is better to go for loan against fixed deposit when in need of short term money. Click to know whey loan against fixed deposit is better then personal loan.
Loan against your Insurance Policies
One can also avail loan against your insurance policies such LIC . However, the policy should be eligible to avail loan such as, it should have a surrender value which happens only after payment of 3 yearly premiums. Only after that you can avail for a loan which would be around 90% of Surrender Value.
Loan against Property(LAP)
LAP is pretty similar to personal loan; the only difference being you put a property owned by you as collateral against the loan. This property might be confiscated in case you default on the loan. As there is collateral against the loan, banks feel more secure in lending and hence the borrower gets some bargaining power as compared to personal loans which is unsecured. Click to know the benefits of loan against property and documents required.
Loan Against Shares
Another way is to pledge your shares, in case do not wish to sell them at this point. Shares can be pledged from any Depository Participant across the country. however, securities should be in the name of the borrower, before an application for a loan against share is made. Click to know how to take loan against shares.
Loan is provided only against multiple scrips as the same serves as a hedge for the bank in case price of a particular scrip falls sharply.
Loan Against Provident Fund
This loan can be availed against the balance in your PPF account. One can avail a loan from your PPF account from the 3rd year of opening your account to the 6th year. Also, the loan amount will be restricted to a maximum of 25 per cent of the balance in your account at the end of the first financial year (if you opt for the loan in the third year). If you opt for a loan in the fourth year, the second year's balance will be taken in to account and so on. Click to know how to take loan on PPF.