While, there are several ways of raising finance to meet your different short and long term financial needs in a crisis yet there are some which you might not be aware of and in many a case these options if chosen wisely can turn out to be cost effective than conventional options
So, here is a list of all such loan types which are yet not popular in India
1. Loan against your car:
You surely know of the car loan that is used for purchasing your most coveted vehicle. In it, for purchasing car you make some down payment and the rest is financed by the bank or NBFC company. And you pay back the amount as per the terms of the lender.
But there is a loan product in which you can secure funds against your car to the extent of 85-90% of the vehicle value. Herein the car serves as a collateral. The loan category cheaper than the otherwise personal or credit card loan can be taken for meeting out any of the financial liability and has to be paid back in 1-3 years time. Such a loan can also be availed in case the credit profile of the individual is not upto the mark or poor. So, this loan product offers immediate or instant liquidity.
All private sector banks including the likes of ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra began offering such a loan after witnessing a slump in corporate lending. Banks view this loan product as a top up loan in which they attempt to retain banks' customers. The risk associated is minimal as banks have already done KYC (know your customer) check on these customers.
Limitation of such a loan is that it is more often disbursed to an individual who is already a bank customer or who might have taken an auto loan from the institution and repaid it.
2. Loan against credit card:
This loan provides instant cash for you as unlike personal loan which needs to be approved this is a pre-approved loan product. The person opting for this loan does not needs to go through the documentation work. The rate of interest is less than what is payable for cash withdrawals via credit card and range between 15-20%. Many of the banks including ICICI, Citi, HDFC and HSBC Bank offer such a loan.
3. Merchant cash advance or loan against credit card swipes:
This is a business loan product i.e. secured and offers loan based on credit card swipes at the merchants' counter. New merchant establishments that are into business for 6 months or more can also secure funds under this product.
Loans upto Rs. 2 crore can be sanctioned under the scheme while for new merchants the limit is kept at Rs. 50 lakhs. The loan limit is assessed based on average card swipes. Merchants can get overdraft facilities for up to 12 months and drop line overdraft for up to 36 months. Generally, working capital needs of the merchant outlet can be met by such a loan. The loan repayment period for such loan product is between 6 months and 2 years.
4. Mudra loan:
MUDRA is an acronym for Micro-Units Development and Refinance Agency and the scheme caters to MSME or micro, small and medium enter with credit requirements of less than Rs. 10 lakhs.
The scheme is further grouped into 3 categories named Shishu, Kishore and Tarun with varying loan sanction limits from Rs. 50000 to Rs. 10,00,000 and is popularly known as Pradhan Mantri Mudra Yojana. A person can raise funds through the scheme for buying a vehicle or for business purposes.