In our 20s, as soon as we start earning money and you start establishing your financial freedom, and start accumulating assets. Although most people associate assets with the term "investment," because the goal is to earn strong returns and/or dispose of them at a profit, there is another less-known aspect of holding assets: loans. If you need money for a financial emergency or a life emergency, you can get a loan against an asset.
Fixed Deposit Overdraft
Fixed Deposit overdraft is another popular investment instrument your can opt to take a loan. Fixed Deposit is also coming under asset class. Instead of breaking your FD prematurely, for which banks tend to levy premature withdrawal penalties in most cases, you can take a loan against your FD, whereas your bank FD continues to earn interest during the deposit tenure.
Most lenders provide a loan against an FD in the form of an overdraft facility, similar to loans against securities, thus as a depositor, you are only needed to pay interest on the amount used from the sanctioned limit, and you are charged until it is repaid.
You can avail of a loan of around 85%-95% of bank FD amount, with the interest rates usually being around 1%-2% higher than the contracted rate of FD pledged as collateral.
Loan Against Gold
Gold is without a doubt one of India's most popular investments. Gold is preferred by all classes, whether for investment or because of the strong history and culture around gold. Because of the widespread availability of this asset in India, taking out a loan against it is a common practice among those with sufficient gold to pledge.
Quick disbursements, a short payback term of up to three years, and LTV (Loan to Value) ratio of up to 75%, and flexible repayment choices other than the traditional EMI, such as bullet repayment, upfront interest payment, and so on, are some of the important aspects of gold loans.
Loan Against Property
When you have a financial need, especially a large one, you take a loan against an Property you already own. Many lenders offer loans against property on a variety of property categories, including residential, commercial, and industrial. These lenders include banks as well.
The LAP loan amount is decided by the property market value as well as the lending institution's LTV ratio, which normally ranges from 50 to 75 percent. In terms of repayment time, LAP may normally be repaid in as little as 15-20 years.
Another lending option for pledging property for finances is a reverse mortgage, which is specifically developed for persons who are elderly and require funds. This page goes into great length about it.
Aside from these assets as collateral for a loan, a few lenders also provide a loan against the vehicle, which allows you to borrow money by surrendering your car. You will be provided a percentage of the market value of your vehicle as a loan to meet your financial needs. Furthermore, if you have a credit card, you may take advantage of the additional benefit of a credit card loan.
Loan Against Securities
If you are an investor or any, you are probably not aware of the loan against securities option. Securities here refers to shares, mutual funds, insurance policies, etc. This option allows the borrowers to borrow against their securities rather than redeem them.
This facility is especially handy with market-linked assets like bonds, mutual funds, and stocks, where you may lose money when you need it and redeem it when your portfolio is in the negative.
When you take a loan against your securities, your securities continue to earn interest returns and you continue to receive the credit of interest, dividends, bonuses, etc., if any, on the pledged collateral. As far as the loan amount is concerned, it would depend upon the type of security pledged as collateral and the LTV ratio assigned by the lender for that security.